Public Provident Fund (PPF) — Complete Guide

📖Overview

Public Provident Fund (PPF) is a government-backed savings scheme offering 7.1% annual interest with complete tax exemption — deposits qualify for Section 80C deduction, interest earned is tax-free, and the maturity amount is tax-free. This triple exemption (EEE — Exempt-Exempt-Exempt) makes PPF the most tax-efficient fixed-income investment in India.

PPF has a 15-year lock-in period, making it ideal for long-term goals like retirement, children's education, or wealth accumulation. You can invest ₹500 to ₹1.5 lakh per financial year. The interest is compounded annually and credited on March 31 each year. The scheme is available at all post offices and major banks.

After 15 years, you can either withdraw the full amount or extend in blocks of 5 years (with or without fresh contributions). Partial withdrawal is allowed from the 7th year onwards. A loan facility is available from the 3rd to 6th year. These features provide limited liquidity while maintaining the long-term savings discipline.

PPF is risk-free — it's backed by the Government of India. Unlike FDs (which are insured only up to ₹5 lakh per bank under DICGC), PPF has unlimited government guarantee. The interest rate is set quarterly by the Finance Ministry, but changes are usually small (±0.1-0.2%). The rate has been between 7.1% and 8.7% over the last decade.

📋Key Details

📊PPF Calculator — How Much Will You Get?

At ₹1.5 lakh/year (maximum) for 15 years at 7.1%:

Total deposited: ₹22,50,000 (₹1.5L × 15 years)

Total interest earned: ₹18,18,209

Maturity amount: ₹40,68,209

That's ₹18.18 lakh in COMPLETELY TAX-FREE interest on ₹22.5 lakh investment. No other fixed-income instrument in India offers this combination.

At ₹50,000/year for 15 years at 7.1%: Deposited ₹7,50,000 → Maturity ₹13,56,070 (interest ₹6,06,070 tax-free).

At ₹1.5 lakh/year for 25 years (15 + two 5-year extensions with contributions): Deposited ₹37,50,000 → Maturity approximately ₹1,03,08,015. Yes — PPF can make you a CROREPATI with just ₹12,500/month invested consistently for 25 years.

Pro tip: Deposit your annual amount before April 5 (the earliest possible date in a financial year). PPF interest is calculated on the minimum balance between the 5th and end of each month. Depositing early maximizes your interest earning for the entire year.

📋PPF Deposit and Withdrawal Rules

Deposit rules: Minimum ₹500 per financial year (to keep account active). Maximum ₹1,50,000 per financial year across all deposits. You can make up to 12 deposits per year. Deposits can be in multiples of ₹50. If you deposit more than ₹1.5 lakh, the excess earns zero interest and won't get 80C benefit — it's returned or adjusted.

Partial withdrawal (from 7th year): From the 7th financial year onwards, you can withdraw up to 50% of the balance at the end of the 4th year preceding the year of withdrawal, or 50% of the balance at the end of the preceding year — whichever is lower. One withdrawal per financial year. This is not a loan — you don't need to repay it.

Loan against PPF (3rd to 6th year): Between the 3rd and 6th financial year, you can take a loan of up to 25% of the balance at the end of the 2nd preceding year. Interest rate on PPF loan is currently 1% above the PPF rate (i.e., 8.1%). The loan must be repaid within 36 months.

Premature closure: Generally not allowed before 15 years. Exceptions: (1) Medical emergency (self, spouse, or dependent children) — after 5 years with documentary proof. (2) Higher education of account holder or dependent child — after 5 years. In both cases, 1% interest penalty applies (you get 6.1% instead of 7.1% for the entire tenure).

Account inactive/discontinued: If you don't deposit the minimum ₹500 in any financial year, the account becomes 'discontinued'. To revive, pay ₹500 per year of default + ₹50 penalty per year. The account continues to earn interest even when discontinued, but you cannot take loans or partial withdrawals until it's revived.

⚖️PPF vs FD vs NPS vs ELSS — Comparison

🚀How to Get Started