PPF Complete Guide: Rules, Interest Rate & Tax Benefits

The Public Provident Fund (PPF) has been a cornerstone of Indian savings for over 50 years. Backed by the government and offering tax-free returns, it remains one of the safest long-term investment options available.

This guide covers everything you need to know about PPF—from opening an account to maximizing your returns.

PPF at a Glance

Feature	Details
Current interest rate	7.1% p.a. (Q4 FY24-25)
Minimum investment	₹500/year
Maximum investment	₹1,50,000/year
Lock-in period	15 years
Tax benefit	Section 80C (up to ₹1.5 L)
Returns taxation	100% tax-free (EEE)
Risk level	Zero (sovereign guarantee)

Current PPF Interest Rate (2024-25)

PPF interest rates are set quarterly by the Ministry of Finance. Recent history:

Period	Interest Rate
Q4 FY24-25 (Jan-Mar 2025)	7.1%
Q3 FY24-25 (Oct-Dec 2024)	7.1%
Q2 FY24-25 (Jul-Sep 2024)	7.1%
Q1 FY24-25 (Apr-Jun 2024)	7.1%
FY23-24	7.1%
FY22-23	7.1%
FY21-22	7.1%
FY20-21	7.1%

The rate has been stable at 7.1% since April 2020. Historically, PPF rates have ranged from 7% to 12%.

Calculate your PPF maturity: Use our PPF Calculator to project your corpus at current rates.

How PPF Interest is Calculated

PPF interest is calculated on the lowest balance between the 5th and end of each month, credited annually on March 31st.

The 5th-of-Month Rule

Deposit Date	Interest Earned
April 1-5	Full month interest
April 6-30	No interest for April

Critical tip: Always deposit before the 5th to maximize interest. Depositing on April 6th instead of April 5th costs you one month's interest.

Example Calculation

If you deposit ₹1,50,000 on April 5th:

• Monthly interest rate: 7.1% ÷ 12 = 0.592%
• Interest for 12 months: ₹1,50,000 × 7.1% = ₹10,650
• Interest credited: March 31st

If you deposit on April 6th:

• Interest for 11 months: ₹1,50,000 × (7.1% × 11/12) = ₹9,762
• Loss: ₹888

PPF Investment Rules

Minimum and Maximum Limits

Rule	Limit
Minimum per year	₹500
Maximum per year	₹1,50,000
Maximum deposits per year	12 (one per month)
Deposit mode	Lump sum or installments

Note: Deposits exceeding ₹1.5 L in a year earn no interest and don't qualify for 80C benefit.

Account Discontinuation

If you don't deposit the minimum ₹500 in a year:

• Account becomes "discontinued"
• ₹50 penalty per year of default
• Can be revived by paying arrears + penalties
• Interest still accumulates on existing balance

PPF Withdrawal Rules

Partial Withdrawal (From Year 7)

After completing 6 financial years, you can make one withdrawal per year:

Withdrawal Limit	Formula
Maximum	50% of balance at end of 4th preceding year OR end of preceding year, whichever is lower

Example: In Year 7 (FY 2031-32):

• Balance at end of Year 4 (FY 2028-29): ₹5,00,000
• Balance at end of Year 6 (FY 2030-31): ₹8,00,000
• Maximum withdrawal: 50% of ₹5,00,000 = ₹2,50,000

Full Maturity (After 15 Years)

At maturity, you have three options:

1. Full withdrawal: Close account and take entire balance
2. Extend without contribution: Extend in 5-year blocks, make one withdrawal per year (no new deposits)
3. Extend with contribution: Extend in 5-year blocks, continue depositing up to ₹1.5 L/year

Tip: If you don't need the money, extend without contribution. Your balance continues earning tax-free interest.

PPF Loan Facility

From Year 3 to Year 6, you can take a loan against your PPF balance:

Feature	Details
Eligibility	Year 3 to Year 6
Maximum loan	25% of balance at end of 2nd preceding year
Interest rate	PPF rate + 1% (currently 8.1%)
Repayment period	36 months
Penalty for late repayment	PPF rate + 6% on outstanding

When to use: Only for genuine emergencies. The 8.1% interest erodes your tax-free returns.

Example: In Year 4:

• Balance at end of Year 2: ₹3,00,000
• Maximum loan: 25% × ₹3,00,000 = ₹75,000

PPF Tax Benefits (EEE Status)

PPF enjoys Exempt-Exempt-Exempt status—the best tax treatment possible:

Stage	Tax Treatment
Contribution	Exempt under Section 80C (up to ₹1.5 L)
Interest earned	Exempt (no tax on yearly interest)
Maturity amount	Exempt (no tax on withdrawal)

Tax Savings Example

Tax Bracket	Annual Deposit	Tax Saved
5%	₹1,50,000	₹7,500
20%	₹1,50,000	₹30,000
30%	₹1,50,000	₹45,000

At the 30% bracket, the effective return becomes: 7.1% + (7.1% × 30%) = 10.15% pre-tax equivalent.

PPF vs Other Investments

PPF vs Fixed Deposit

Feature	PPF	FD
Interest rate	7.1%	6.5-7.5%
Lock-in	15 years	Flexible (7 days to 10 years)
Taxation	EEE (tax-free)	Taxable at slab rate
Risk	Zero (govt backed)	Low (up to ₹5L DICGC insured)
Liquidity	Low	High

Verdict: PPF wins for 15+ year goals due to tax-free returns.

PPF vs ELSS

Feature	PPF	ELSS
Expected returns	7.1%	12-15%
Lock-in	15 years	3 years
Risk	Zero	High (market-linked)
Tax on returns	Nil	12.5% LTCG above ₹1.25 L

Verdict: ELSS wins for higher growth if you can handle volatility.

PPF vs NPS

Feature	PPF	NPS
Expected returns	7.1%	8-10% (depends on allocation)
Lock-in	15 years	Until 60
Tax on maturity	Nil	40% must buy annuity (taxable)
Additional tax benefit	Only 80C	80C + 80CCD(1B)

Verdict: NPS offers higher returns and extra tax benefits, but PPF offers fully tax-free maturity.

Opening a PPF Account

Eligibility

• Indian residents only (NRIs cannot open new accounts)
• One account per person (second account is irregular)
• Minor accounts allowed (guardian operated)

Where to Open

1. Post offices - Any head post office or designated branch
2. Banks - SBI, ICICI, HDFC, Axis, and most nationalized banks
3. Online - Through net banking (if your bank supports it)

Documents Required

• Identity proof (Aadhaar, PAN, Passport)
• Address proof
• Passport-size photographs
• Nomination form

Maximizing PPF Returns: Pro Tips

1. Deposit Before the 5th

Always deposit between April 1-5 to earn 12 full months of interest.

2. Lump Sum vs Monthly

If you have funds available:

• Lump sum on April 5th earns maximum interest
• Monthly SIP is easier to manage but earns slightly less

Strategy	Annual Interest (₹1.5 L deposit)
Lump sum on April 5th	₹10,650
Monthly ₹12,500 (1st of month)	₹10,106
Monthly ₹12,500 (random dates)	~₹9,500-10,000

3. Don't Break the Chain

Deposit at least ₹500 every year, even if you can't invest ₹1.5 L. Discontinuation penalties are avoidable.

4. Extend After Maturity

If you don't need the money, extend in 5-year blocks. Your balance continues compounding tax-free.

5. Open for Your Child

PPF accounts for minors (in your name as guardian) help build their corpus while you get 80C benefits. The child gets the account transferred at 18.

PPF Maturity Calculator

Here's how ₹1,50,000/year grows over 15 years at 7.1%:

Year	Deposits (Cumulative)	Interest (Cumulative)	Total Balance
5	₹7,50,000	₹1,30,404	₹8,80,404
10	₹15,00,000	₹5,54,717	₹20,54,717
15	₹22,50,000	₹18,18,209	₹40,68,209

Your ₹22.5 L grows to ₹40.68 L—that's ₹18.18 L in tax-free interest.

Use our PPF Calculator to calculate your exact maturity amount.

Common PPF Mistakes to Avoid

1. Depositing after the 5th - Lose one month's interest
2. Opening multiple accounts - Second account earns no interest
3. Exceeding ₹1.5 L limit - No interest or tax benefit on excess
4. Taking loans unnecessarily - 8.1% loan interest hurts returns
5. Ignoring extension option - Missing out on continued tax-free compounding

Conclusion

PPF is the gold standard for risk-free, tax-efficient long-term savings. While it won't generate equity-like returns, its guaranteed 7.1% tax-free returns make it an essential part of any portfolio.

Ideal for:

• Conservative investors
• Retirement planning (alongside equity)
• Children's education fund
• Tax saving under 80C

Not ideal for:

• Short-term goals (15-year lock-in)
• Aggressive wealth creation (consider ELSS/equity)
• NRIs (cannot open new accounts)

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Calculate your PPF returns: Use our PPF Calculator to see how your savings grow over 15 years.