Key points
- Deposit ₹500 to ₹1.5 lakh a year for 15 years; interest and maturity are tax-free.
- ₹1.5 lakh a year for 15 years at 7.1% grows to about ₹40.7 lakh.
- Deposit before the 5th of the month — interest is paid on the lowest balance between the 5th and month-end.
- After 15 years, extend in 5-year blocks, with or without fresh deposits.
The basics
- Who: any resident Indian, one account per person (plus accounts for minors as guardian). NRIs cannot open new accounts.
- Where: post offices and authorised banks.
- Deposits: minimum ₹500 and maximum ₹1,50,000 per financial year, in a lumpsum or instalments.
- Tenure: 15 full financial years after the year of opening.
- Interest: set by the government every quarter — 7.1% since April 2020 — compounded yearly and credited on 31 March.
How the interest is calculated
Interest for each month is calculated on the lowest balance between the 5th day and the end of that month. A deposit made on the 6th earns no interest for that month. For the most interest, deposit the full year’s amount before 5 April.
Example: ₹1,50,000 deposited before 5 April every year for 15 years at 7.1% → about ₹40.7 lakh at maturity, of which about ₹18.2 lakh is interest, all tax-free.
Loans and partial withdrawals
- Loan: from the 3rd to the 6th financial year, up to 25% of the balance at the end of the second year before the loan, at 1% above the PPF rate.
- Partial withdrawal: once a year from the 7th financial year, up to 50% of the balance at the end of the 4th year before, or of the previous year, whichever is lower.
- Premature closure: after 5 years, for specified reasons such as serious illness or higher education, with a 1% interest penalty.
Extension after 15 years
On maturity you can withdraw everything, or extend in blocks of five years. With contributions, you must submit the extension form within a year of maturity, and can withdraw up to 60% of the maturity balance over the block. Without contributions, the account keeps earning interest and you can withdraw any amount once a year.
Tax benefits
PPF enjoys exempt-exempt-exempt status: deposits qualify for Section 80C in the old regime, and both the interest and the maturity amount are tax-free in either regime. Under the new regime you lose the 80C deduction on deposits, but the tax-free interest remains.
What different deposits grow to
| Yearly deposit | Period | Maturity value |
|---|---|---|
| ₹50,000 | 15 years | ≈ ₹13.6 lakh |
| ₹1,50,000 | 15 years | ≈ ₹40.7 lakh |
| ₹1,50,000 | 20 years (one extension) | ≈ ₹66.6 lakh |
| ₹1,50,000 | 25 years (two extensions) | ≈ ₹1.03 crore |
Extending without further deposits also keeps the balance growing: ₹40.7 lakh left for five more years at 7.1% becomes about ₹57.3 lakh, all tax-free.
PPF for children
A parent or guardian can open a PPF account for a minor child. Deposits in the child’s account count within the parent’s own ₹1.5 lakh yearly limit, not in addition to it. The account transfers to the child at 18. For a daughter under 10, compare it with the Sukanya Samriddhi Yojana, which usually pays a higher rate.
Frequently asked questions
What happens if I miss a PPF deposit?
If you deposit less than ₹500 in a financial year, the account becomes inactive. You can revive it by paying ₹50 for each missed year plus the ₹500 minimum for each of those years.
Can I open more than one PPF account?
No. One individual can have only one PPF account (plus accounts opened as guardian for minors). A second account is treated as irregular and earns no interest.
Is PPF interest taxable?
No. PPF interest and the maturity amount are fully tax-free under both tax regimes.