How PPF works
The Public Provident Fund (PPF) is a government-backed, long-term savings scheme offering a guaranteed, tax-free return. It is one of the most popular instruments for building a retirement corpus because of its EEE tax status, sovereign backing, and predictable compounding.
Key mechanics:
- Minimum deposit: ₹500 per financial year (failing to deposit in a year makes the account “inactive” — a small reactivation fee applies).
- Maximum deposit: ₹1,50,000 per financial year (combined across all accounts held in your name and your minor children’s names).
- Lock-in: 15 years from the end of the financial year in which the account is opened.
- Interest: compounded annually at the government-notified rate (7.1% as of Q1 FY 2026-27).
- Compounding method: deposit is treated as made at the start of the year; interest accrues on (opening balance + deposit) for that year.
- Extension: after 15 years, the account can be extended in 5-year blocks with or without contributions.
This calculator models the with-contribution scenario — deposit continues in each extended year at the same annual amount.
Deposit limits and penalty for skipping
| Rule | Detail |
|---|---|
| Minimum deposit per year | ₹500 (account becomes inactive if missed) |
| Maximum deposit per year | ₹1,50,000 |
| Reactivation fee | ₹50 per dormant year + ₹500 minimum deposit |
| Extension window | Notify bank/post office before the end of the 15th year |
Tax treatment — EEE status
PPF is one of the few instruments in India with full EEE (Exempt-Exempt-Exempt) status:
- Exempt on contribution: Annual deposits are deductible under Section 80C up to ₹1,50,000 per FY (combined with other 80C instruments such as EPF, ELSS, life insurance premiums).
- Exempt on accrual: Interest credited to the PPF account each year is not included in taxable income — unlike fixed deposits where interest is taxable annually.
- Exempt on maturity: The entire maturity amount — principal plus accumulated interest — is received tax-free.
For a taxpayer in the 30% slab depositing the maximum ₹1,50,000/year, the tax saving from Section 80C alone is ₹46,800 per year. Over 15 years, this totals ₹7,02,000 in contribution-stage savings alone.
See our Section 80C calculator to model the combined tax benefit.
Withdrawal and loan rules
| Situation | Rule |
|---|---|
| Partial withdrawal | Permitted from year 7 onward; amount limited to 50% of balance 4 years prior |
| Premature full closure | After year 5, with 1% interest penalty; only for education, illness, or NRI status |
| Loan against PPF | Years 3–6; up to 25% of balance 2 years prior; repay within 36 months at PPF rate + 1% |
| Normal maturity | Full balance at 15-year mark (or end of extension block); fully tax-free |
Extension blocks — grow your corpus further
The power of PPF compounds significantly with each 5-year extension. Starting at the base 15-year maturity, each additional block at 7.1% grows the balance substantially:
| Deposit years | Balance (₹1.5L/yr) |
|---|---|
| 15 years | ~₹40.7L |
| 20 years (1 block) | ~₹65.6L |
| 25 years (2 blocks) | ~₹1.01Cr |
Comparison with Sukanya Samriddhi and NSC
| Feature | PPF | Sukanya Samriddhi | NSC |
|---|---|---|---|
| Rate (Q1 FY 2026-27) | 7.1% | 8.2% | 7.7% |
| Tax status | EEE | EEE | EET (interest taxable) |
| Eligible investors | Any resident individual | Girl child (parent/guardian) | Any individual |
| Maturity period | 15 years (extendable) | 21 years from opening | 5 years |
| Max deposit per year | ₹1,50,000 | ₹1,50,000 | No limit |
| Partial withdrawal | After 7 years | After girl turns 18 | Not allowed |
| Premature closure | After 5 years (penalty) | Limited grounds | Not allowed |
Key takeaway: If you have a daughter under 10, open both — SSY for her-specific savings at 8.2%, PPF for your own long-term wealth. NSC is suitable when you want a 5-year lock-in without the long commitment.
Bridges
- Section 80C calculator — calculate the annual tax saving on PPF deposits
- Sukanya Samriddhi calculator — compare with the higher-rate girl-child scheme
- SIP calculator — project equity mutual fund SIP returns alongside PPF
- Lumpsum calculator — one-time investment projection for comparison