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What is PPF?
The Public Provident Fund (PPF) is a long-term savings scheme run by the Government of India under the Public Provident Fund Scheme, 2019. You can open an account at any post office or at an authorised bank. The money you deposit is backed by the government, and the interest you earn is tax-free.
PPF is a 15-year commitment. You must deposit at least ₹500 every financial year and can deposit up to ₹1.5 lakh. It suits money you will not need for a long time, such as the safe part of a retirement plan or a child's higher-education fund.
PPF at a Glance (October 2026)
Interest rate: 7.1% a year for October–December 2026. The government reviews it every quarter, and it has been 7.1% since April 2020.
Deposits: ₹500 minimum and ₹1.5 lakh maximum per financial year
Term: 15 full financial years after the year you open the account. After that it can be extended in 5-year blocks.
Tax: Interest and maturity amount are tax-free. Deposits qualify for a deduction under the old tax regime only.
Who can open: Resident Indian individuals, one account each, plus one account on behalf of each minor child. NRIs cannot open a new account.
How It Works
Interest
The government announces the PPF rate every quarter. The rate is not fixed for 15 years. Your whole balance earns whatever rate applies in each quarter. Interest is calculated every month on the lowest balance between the 5th and the last day of the month. It is added to your account once a year, on 31 March, and then earns interest itself (annual compounding).
This 5th-of-the-month rule matters. A deposit made on or before the 5th earns interest for that month; a deposit made on the 6th does not. If you invest a lump sum, deposit it on or before 5 April to earn interest for the whole year.
Deposits and maturity
You can deposit any amount from ₹500 to ₹1.5 lakh in a financial year, in one go or in parts. The ₹1.5 lakh cap is combined across your own account and any minor's account where you are the guardian. Anything above the cap earns no interest.
The account matures after 15 full financial years, counted from the end of the year you opened it. For example, an account opened in FY 2026-27 matures on 1 April 2042.
Example: ₹1.5 Lakh a Year for 15 Years
Suppose you invest the full ₹1.5 lakh every year (total ₹22.5 lakh) and the rate stays at 7.1% throughout. Actual rates will vary.
Deposit by 5 April each year: about ₹40.7 lakh at maturity
Deposit at the end of March each year: about ₹38.0 lakh at maturity
₹12,500 every month, by the 5th: about ₹39.4 lakh at maturity
Depositing on time early in the year, rather than at the last minute, is worth about ₹2.7 lakh in this example.
After 15 years: three choices
- Close the account and withdraw the full balance, tax-free.
- Extend without new deposits. The balance keeps earning interest, and you can withdraw any amount once a year. This is the default if you do nothing.
- Extend with deposits for a 5-year block. You must submit the extension form to your bank or post office within one year of maturity. If you keep depositing without submitting the form, those deposits earn no interest. During the block you can withdraw up to 60% of the balance at the start of the block.
In the example above, extending for 5 more years with ₹1.5 lakh a year would grow the balance to about ₹66.6 lakh. Without new deposits, it would grow to about ₹57.3 lakh. Both figures assume the rate stays at 7.1%.
Loans, Withdrawals and Early Closure
PPF is built for the long term, but you can still reach the money in stages. The years below are financial years, and the year you open the account is year 1.
- Loan (years 3 to 6): You can borrow up to 25% of the balance at the end of the second year before the year you apply. Interest is 1% a year above the PPF rate. Repay within 36 months. You can take a second loan only after repaying the first, and still within year 6.
- Partial withdrawal (from year 7): One withdrawal a year, up to 50% of the lower of two balances: the one at the end of the 4th year before the withdrawal, or the one at the end of the previous year. It is not a loan, so you do not repay it.
- Premature closure (from year 7): This is allowed only for specific reasons, such as treating a life-threatening illness of the account holder or a close family member, or the higher education of the account holder or their child. You need documents. Interest for the whole period is cut by 1%.
For example, an account opened in FY 2026-27 is eligible for loans from FY 2028-29 to FY 2031-32 and for partial withdrawals from FY 2032-33.
How PPF Is Taxed
PPF is often called EEE (exempt–exempt–exempt). That means your deposits can reduce your taxable income, and the interest and the maturity amount are not taxed.
- Deposits: Deposits up to ₹1.5 lakh a year can be deducted under section 123 of the Income-tax Act, 2025 (formerly section 80C of the 1961 Act). The same ₹1.5 lakh limit is shared with EPF, ELSS, life insurance premiums and the other eligible items. The deduction is available only under the old tax regime. The new regime is the default.
- Interest and maturity: These are tax-free whichever regime you choose. Show the yearly interest as exempt income in your tax return.
If you use the new tax regime, PPF is still a safe, tax-free place to save. You just won't get the deduction on your deposits. Compare both regimes before you decide; our income tax calculator shows them side by side.
Key Benefits and Limitations
- Government-backed safety: Your capital and the interest already credited are backed by the Government of India. The balance does not fall when the stock market falls.
- Tax-free growth: Interest compounds without tax, which helps people in higher tax brackets the most.
- Built-in discipline: The long term and limited early access make it hard to dip into savings for short-term wants.
- Low cost and simple: There are no fees or charges, and the minimum is just ₹500 a year.
Low liquidity: Money is largely locked in for 6 years, and fully for 15.
Capped amount: ₹1.5 lakh a year is often not enough for big goals on its own.
Rate can change: The rate is reset every quarter and could fall in future.
Returns may lag inflation plus growth assets: Over 15 years, equity mutual funds have the potential for higher returns, but with market risk. Many families use PPF for the safe part of their portfolio and equity for growth.
Common Mistakes to Avoid
How to Get Started
- Choose where to open it: A post office or an authorised bank. Many banks let you open and fund PPF online through net banking if you already hold a savings account with them.
- Keep your documents ready: PAN, Aadhaar, a photograph and the account-opening form. Add a nominee when you open the account.
- Set up deposits by the 5th: Use one deposit by 5 April or a monthly standing instruction that runs before the 5th of each month. Keep total deposits across your own and your children's accounts within ₹1.5 lakh.
- Mark your maturity date: Decide a year ahead whether to close or extend, and submit the extension form in time if you want to keep depositing.
In retirement, a matured PPF account extended without new deposits works like a tax-free income reserve. The balance keeps earning interest, and you can withdraw any amount once a year with no tax. Families who start PPF in their 30s or 40s and extend it to retirement get a debt cushion that can fund a few years of expenses. That lets their equity investments stay invested through market falls.
Frequently Asked Questions
Q: Is the PPF interest rate fixed when I open the account?
No. Your whole balance earns the rate the government announces each quarter. Unlike a fixed deposit, the rate is not locked in at the start. It is 7.1% for October–December 2026.
Q: Can I open a PPF account for my child?
Yes. One parent (or legal guardian) can open one account in each minor child's name. Your deposits into your own account and your child's account together count towards the same ₹1.5 lakh yearly limit. When the child turns 18, they take over the account.
Q: I am an NRI. Can I invest in PPF?
NRIs cannot open a new PPF account. If you opened one while you were a resident and later became an NRI, you can keep depositing until it matures. You cannot extend it after 15 years, so plan to close it at maturity.
Q: What happens to my PPF account if I die?
Your nominee (or your legal heirs if there is no nominee) can claim the balance at any time, even before 15 years. The account cannot be continued in their name. This is why adding a nominee when you open the account matters.
Q: Should I choose PPF or ELSS for tax saving?
They do different jobs. PPF gives government-backed safety with a 15-year term. ELSS is an equity mutual fund with a 3-year lock-in, higher growth potential and market risk. Many investors use both: PPF for stability and ELSS for long-term growth. See our Section 80C guide for the full comparison.