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PPF

Investment

Public Provident Fund

A long-term government-backed savings scheme in India with a 15-year lock-in, offering tax-free interest and full exemption under the EEE (Exempt-Exempt-Exempt) tax status.

Definition

The Public Provident Fund (PPF) is a long-term government-backed savings and investment scheme launched in 1968 and administered through Post Offices and designated banks. It is designed to help individuals build a retirement corpus over 15 years while availing significant tax benefits.

PPF has a unique EEE tax status:

  • Exempt at investment: Contributions up to ₹1.5 lakh/year qualify for Section 80C deduction
  • Exempt on accumulation: Interest earned each year is fully tax-free
  • Exempt at maturity: The entire maturity amount (principal + interest) is tax-free

This makes PPF one of the few instruments in India with complete tax exemption at all three stages.

Formula

PPF interest is computed on the minimum balance between the 5th and last day of each month and credited to the account annually on 31st March.

Approximate maturity value (with fixed deposits):

M = P × [(1+r)^n − 1] / r × (1+r)

Where P = annual contribution, r = annual interest rate, n = number of years.

Worked Example

You deposit ₹1,50,000 in your PPF account at the start of each financial year for 15 years at an interest rate of 7.1%.

  • Annual deposit (P) = ₹1,50,000
  • r = 7.1% = 0.071
  • n = 15 years

Maturity amount ≈ ₹40.68 lakhs

Total investment = ₹22.5 lakhs. The interest earned = ₹18.18 lakhs — entirely tax-free. Use the PPF calculator for precise year-by-year projections.

Key Things to Know

  • Timing of deposits: Deposit before the 5th of April to earn interest for April. If you deposit between 6 April and 5 May, you miss one month's interest. Depositing early in the financial year maximises interest.
  • Loan against PPF: You can take a loan against PPF from the 3rd to the 6th financial year. The loan amount can be up to 25% of the balance at the end of the 2nd preceding year.
  • Joint accounts not allowed: PPF accounts cannot be held jointly. However, you can open a separate account as guardian on behalf of a minor.
  • vs ELSS: PPF is risk-free with fixed returns; ELSS invests in equity and offers potentially higher returns but with market risk. For investors in higher tax brackets who can tolerate risk, ELSS is often more rewarding than PPF.
  • vs NPS: NPS offers an additional deduction of ₹50,000 under Section 80CCD(1B) over and above the 80C limit, and can deliver higher returns via equity exposure, but has a lock-in until age 60.

Related Calculators

PPF Calculator →Calculate PPF maturity amount and total interest on yearly deposits. Uses current 7.1% p.a. rate with annual compounding for 15–50 year projections.
NPS Calculator →Estimate your NPS retirement corpus with this free calculator. Enter age, monthly contributions, and expected returns to plan your National Pension Scheme investment.
SIP Calculator →Calculate your SIP returns instantly. Enter monthly investment, expected annual return, and time period to see total corpus, invested amount, and estimated gains.

Related Terms

Section 80CSection 80C — Income Tax DeductionELSSEquity Linked Savings SchemeNPSNational Pension Scheme
Frequently Asked Questions
What is the current PPF interest rate?
The PPF interest rate is set by the Government of India every quarter. As of FY 2024–25, the rate is 7.1% per annum, compounded annually. The rate has been stable at 7.1% since April 2020, though it can be revised.
Can I withdraw from PPF before 15 years?
Partial withdrawals are allowed from the 7th financial year onwards — up to 50% of the balance at the end of the 4th year or the immediately preceding year, whichever is lower. Full premature closure is allowed after 5 years in specific cases (serious illness, higher education).
Is PPF better than FD?
PPF offers tax-free returns under the EEE (Exempt-Exempt-Exempt) regime: contributions qualify for Section 80C deduction, interest earned is tax-free, and the maturity amount is tax-free. FD interest is fully taxable. For those in higher tax brackets, PPF's post-tax return is significantly better than FD.
Can I extend PPF after 15 years?
Yes. After the initial 15-year term, you can extend the account in blocks of 5 years indefinitely, with or without further contributions. If extended with contributions, the interest and Section 80C deduction benefits continue.
What is the maximum deposit in PPF?
The maximum deposit in a PPF account is ₹1.5 lakh per financial year, which is also the maximum qualifying amount for Section 80C deduction. The minimum deposit is ₹500 per year to keep the account active.