Public Provident Fund (PPF): The Complete Guide for Investors

Basic Eligibility

Any resident Indian individual can open a PPF account. There is no minimum or maximum age for the account holder. A 22-year-old fresh graduate, a 40-year-old professional, and a 60-year-old retiree are all equally eligible.

You can hold exactly one PPF account in your own name. Holding more than one personal PPF account is not allowed. If a second account is opened accidentally or deliberately, it is treated as irregular, earns no interest, and the deposits in it are returned without a tax benefit.

Who Cannot Open a PPF Account

Non-Resident Indians (NRIs) cannot open a new PPF account. If you hold a PPF account as a resident Indian and subsequently become an NRI, you can continue the account until the original 15-year maturity, but you cannot extend it in 5-year blocks after maturity. The account closes at maturity and the balance is paid out.

Hindu Undivided Families (HUFs) are no longer eligible to open PPF accounts. Only individuals can hold PPF accounts.

Joint accounts are strictly prohibited. A PPF account always belongs to a single individual. You cannot co-own a PPF account with a spouse, parent, sibling, or child.

Can a Minor Have a PPF Account?

Yes. A parent or legal guardian can open and operate a PPF account on behalf of a minor child. The account is registered in the minor's name; the guardian makes the deposits and handles all transactions until the child turns 18.

Once the minor turns 18, they take over the account as the primary holder and manage it independently. The account was opened in their name from the start — all the accumulated balance belongs to them.

An important combined limit applies: a guardian who has their own PPF account and also deposits into a minor's PPF account must ensure the total deposited across both accounts does not exceed ₹1.5 lakh in a financial year. The ceiling is per individual per year across all accounts the individual directly controls or contributes to.

A minor cannot hold more than one PPF account. There is no lower age limit — a parent can open an account even for a newborn.

Opening Online Through Your Bank

Log in to your bank's internet banking portal or open the mobile app. Navigate to 'New Account', 'Government Schemes', or 'PPF Account' depending on your bank's interface. Fill in the required details, link your savings account (from which deposits will be made), confirm your KYC information, and submit the request. Most banks activate the PPF account within one to two business days and send account details by SMS or email.

Once active, you can view balances, make deposits, and download account statements entirely online without visiting a branch.

Opening Offline at a Branch or Post Office

Visit any authorised bank branch or post office with the required documents. Ask for the PPF account opening form (Form 1 under the PPF Scheme 2019, or the bank's equivalent). Fill the form carefully, attach your documents, make the minimum initial deposit of ₹500, and submit. You will receive a passbook or a statement of account as confirmation.

Documents Required

• PPF account opening form (provided by the bank or post office)
• PAN card (mandatory)
• Aadhaar card or other valid address proof
• Recent passport-size photograph
• Nomination form with nominee details
• Initial deposit of at least ₹500 (cheque, cash, or NEFT from your linked savings account)

Minimum and Maximum Limits

The minimum deposit in a financial year (April 1 to March 31) is ₹500. You must deposit at least this much to keep the account active. The maximum you can deposit is ₹1,50,000 in a financial year.

This ₹1.5 lakh ceiling is per individual per year across all PPF accounts. If you are a guardian depositing into your own PPF and also into a minor child's PPF, the combined total must stay within ₹1.5 lakh.

Any amount deposited above ₹1.5 lakh earns zero interest and does not qualify for any tax deduction. It is returned to you without benefit — so there is no reason to exceed the limit.

Flexibility in Deposits

Unlike a recurring deposit that demands a fixed amount every month, PPF allows you to deposit in any amount, on any day, in any number of instalments within a financial year.

You can choose a pattern that suits your cash flows. Some investors deposit the full ₹1.5 lakh in April (the first month of the financial year). Others deposit monthly, quarterly, or whenever they have surplus funds. The important consideration is the timing relative to the 5th of each month — which affects how much interest you earn.

What Happens If You Miss a Year's Minimum Deposit?

If you do not deposit the minimum ₹500 in any financial year, your PPF account becomes 'inactive' (sometimes called dormant). An inactive account cannot be used for partial withdrawals or loans until it is reactivated.

Importantly, an inactive account continues to earn interest at the prevailing PPF rate. Your existing balance keeps compounding — you simply cannot top it up or use it for loans or withdrawals until you revive it.

To reactivate an inactive account, visit your bank or post office and pay a revival fee of ₹50 for each year the account was inactive, plus the minimum deposit of ₹500 for each missed year. For example, if you missed three years, pay ₹1,500 (3 × ₹500) in deposits and ₹150 (3 × ₹50) in penalties.

How the Interest Rate Is Decided

The PPF interest rate is declared by the Ministry of Finance every quarter — in January, April, July, and October — covering the next three months. The rate can stay the same or change each quarter depending on the government's assessment of economic conditions.

As of 2026, the rate is 7.1% per annum, compounded annually. It has remained at this level since April 2020. But because the government reviews it quarterly, the rate you earn over a 15-year PPF tenure may not always be exactly 7.1%. For long-term financial planning, it is prudent to model with a range — say 6.5% to 7.5% — rather than assuming today's rate is fixed forever.

The PPF rate is not market-linked. It does not go up when stock markets rise or fall when interest rates drop suddenly. It is a policy decision, and changes tend to be gradual.

Why the Timing of Your Deposits Matters

PPF interest is calculated on the minimum balance in your account between the 5th and the last day of each month. This one rule has a practical consequence every PPF investor should know.

If your deposit reaches the PPF account on or before the 4th of a month, it is part of the balance on the 5th. You earn interest on it for that entire month.

If your deposit reaches the account on the 5th or later, it is not included in that month's interest calculation. You effectively lose one month's interest on that deposit.

Example: You plan to deposit ₹12,500 per month for 12 months (total ₹1.5 lakh). If you deposit on the 3rd of every month, your deposit earns interest every month. If you deposit on the 8th of every month, you lose one month's interest every single time — forfeiting about ₹900 per year on a ₹1.5 lakh balance, a loss that compounds significantly over 15 years.

The simplest and most effective strategy: make your full annual deposit (₹1.5 lakh if possible) before the 5th of April, the first month of the financial year. This ensures your entire contribution earns interest for all 12 months.

What the Numbers Tell You

Over 15 years, you invest a total of ₹22.5 lakh (₹1.5 lakh × 15 years). At 7.1% compounded annually, your corpus grows to approximately ₹40.68 lakh at maturity.

That is ₹18.18 lakh earned from compound interest — nearly 81% of the amount you invested, generated at zero additional effort. And every single rupee of that interest is completely tax-free.

Notice how interest accelerates in later years. In Year 1, you earn ₹10,650. By Year 15, you earn ₹2.69 lakh in a single year. This acceleration is the hallmark of compounding: the longer you stay invested, the harder your money works for you without any additional effort from you.

Option 1: Withdraw Everything and Close

Submit a maturity withdrawal form to your bank or post office and receive the entire balance — principal plus all interest — completely tax-free. The PPF account closes.

You are free to open a fresh PPF account after closing the old one, restarting the 15-year cycle with a new account.

Option 2: Extend Without Fresh Contributions

If you do nothing at maturity, the account automatically continues in 'passive extension' mode. Your existing balance stays invested, earns interest at the prevailing PPF rate, and you can withdraw any amount — including the full balance — at any time. There is no limit on how much you can withdraw in this mode, though only one withdrawal per year is allowed.

This option suits retirees who want to keep their corpus earning tax-free interest while drawing from it as needed, without committing to any further deposits.

Important: If you want to switch to the 'extension with contributions' mode, you cannot do so later if you initially did nothing. The window to choose active extension with contributions closes one year after maturity.

Option 3: Extend With Fresh Contributions

If you want to continue making new deposits into PPF beyond 15 years, submit an extension form to your bank or post office within one year of the original maturity date. The account is then extended by 5 years, and all normal rules apply: minimum ₹500, maximum ₹1.5 lakh per year, EEE tax treatment.

During an active extension period, you can make one partial withdrawal per year of up to 60% of the balance at the start of the extension block.

You can keep extending indefinitely — in unlimited 5-year blocks — as long as you submit each renewal request within one year of the previous block's maturity.

Example: Priya's PPF matures in 2041. She extends with contributions in 2041. By 2046, her corpus has grown to approximately ₹65 lakh. She extends again. By 2051, the corpus exceeds ₹97 lakh. A 15-year scheme has become a 30-year, ₹1 crore wealth-creation vehicle — entirely tax-free.

When Are You Eligible?

Partial withdrawals are permitted from the beginning of the 7th financial year of your account. This means you must complete six full financial years from the year of your first deposit.

Example: Your first deposit is in FY 2026-27 (Year 1). Year 7 begins in April 2032. Your first partial withdrawal is available from April 2032 onwards.

Only one partial withdrawal is allowed in any financial year, regardless of how urgently you need money.

How Much Can You Withdraw?

The maximum withdrawal in any year is 50% of the balance at the end of the 4th financial year immediately preceding the year of withdrawal, or 50% of the balance at the end of the preceding financial year — whichever is lower.

In practice, since PPF balances grow over time, the balance four years ago is almost always lower than last year's balance. So the practical limit is usually 50% of the balance from four years prior.

Example: You apply for a partial withdrawal in FY 2033-34 (Year 8). The 4th preceding year = FY 2029-30 (Year 4). From the compounding table, the Year 4 balance is approximately ₹7,14,333. The preceding year (Year 7) balance is approximately ₹13,94,523. The lower figure is ₹7,14,333. Your maximum withdrawal = 50% of ₹7,14,333 = ₹3,57,167.

A partial withdrawal is not a loan. You do not repay it. It permanently reduces your account balance, and future interest is calculated on the reduced balance.

When and How Much Can You Borrow?

The loan facility is available from the 3rd financial year through the end of the 6th financial year. You can take one loan at a time — a new loan can only be taken after the previous one is fully repaid.

The maximum loan amount is 25% of the balance at the end of the 2nd financial year immediately preceding the loan year.

Example: You apply for a loan in FY 2029-30 (Year 4 of your account, opened in FY 2026-27). The 2nd preceding year = FY 2027-28 (Year 2). If your Year 2 year-end balance is ₹3,32,706, the maximum loan = 25% of ₹3,32,706 = ₹83,177.

The interest on a PPF loan is 2% per annum above the prevailing PPF rate. At the current 7.1% PPF rate, the loan interest is 9.1%. This is more expensive than a partial withdrawal (which carries no interest) but significantly cheaper than a personal loan or credit card debt.

Repaying the PPF Loan

You must repay the loan principal within 36 months (3 years) from the month in which the loan was taken. Repayment can be in one lump sum or in instalments — there is no fixed EMI.

After the principal is cleared, you must pay the accrued interest in up to two further instalments.

If the principal is not repaid within 36 months, the outstanding amount continues as a loan but at a penal interest rate of 6% per annum above the PPF rate (instead of the normal 2%) from the date the loan was disbursed. This makes delayed repayment significantly more expensive.

The Premature Closure Penalty

When a PPF account is closed prematurely, a penalty of 1% is applied retroactively to the interest rate for the entire life of the account. In other words, all interest already credited is recalculated at a rate 1% lower than the actual PPF rate, and the difference is recovered from the final payout.

Example: Your PPF account ran for 7 years and earned interest at 7.1%. On premature closure, the interest is recalculated at 6.1% for all 7 years. The difference between the 7.1% interest already paid and the recalculated 6.1% interest is deducted from your closing balance.

This penalty is a meaningful financial deterrent. Consider premature closure only when genuinely necessary — the loss of 1% interest over several years, compounded, can be significant.

Claiming the Balance After Death

If the account holder passes away, the PPF account is closed immediately. It cannot be continued or operated by the nominee. The nominee (or legal heir, if no nomination exists) receives the full balance — principal plus interest earned up to the date of death — without any premature closure penalty.

Even if the account has not completed 15 years, the nominee is entitled to the full balance. The 15-year rule applies to the account holder's access during their lifetime, not to the nominee's right to claim on death.

To claim the amount, the nominee must submit a death certificate, their identity proof, the original PPF passbook, and a claim form to the bank or post office.

Stage 1 — Tax Deduction on Contributions

Deposits into your PPF account are eligible for deduction under Section 80C of the Income Tax Act, up to ₹1.5 lakh per financial year. This reduces your taxable income by the deposited amount.

Example: Your annual income is ₹14 lakh and you deposit ₹1.5 lakh into PPF. Your taxable income becomes ₹12.5 lakh (before other deductions). In the 30% tax bracket, this saves you ₹45,000 in tax in that year alone. Over 15 years, that is ₹6.75 lakh in direct tax savings — before accounting for any interest benefit.

Stage 2 — Interest Is Completely Tax-Free

Every rupee of interest credited to your PPF account every year is completely exempt from income tax. There is no TDS (Tax Deducted at Source). The bank or post office does not deduct any tax before crediting interest.

You do not need to include PPF interest as taxable income in your income tax return. It is advisable, however, to disclose it in the 'exempt income' section of your return for transparency.

This is a significant advantage over bank FDs and most debt instruments, where the interest is taxed at your income slab rate every year.

Stage 3 — Maturity Proceeds Are Tax-Free

When you withdraw the maturity amount — whether at the end of 15 years or during an extension period — the entire amount is exempt from tax. No capital gains tax, no TDS, no income tax applies to the PPF maturity proceeds.

Compare this to a bank FD: the interest from a 15-year FD is taxable as income every year, and the maturity amount is also subject to tax. On a ₹40 lakh corpus, the cumulative tax differential between PPF and FD — for a 30% taxpayer — can easily exceed ₹7–9 lakh over 15 years.

PPF Under the New Tax Regime

The new tax regime introduced in 2020 (and made the default regime from FY 2023-24 onward) offers lower income tax slabs but eliminates most deductions, including Section 80C.

If you choose the new tax regime, you cannot claim the Section 80C deduction on your PPF deposits. The upfront tax saving disappears.

However, the other two benefits remain intact: PPF interest stays completely tax-free, and the maturity amount remains fully exempt. So PPF still offers two out of three tax advantages under the new regime.

Whether PPF makes sense for you under the new regime depends on your tax bracket, alternative investment options, and whether the tax-free interest is meaningful relative to other fixed-income alternatives. For high-income individuals who have shifted to the new regime and no longer need 80C deductions, PPF's guaranteed, tax-free interest on a large accumulated balance is still a compelling advantage over FDs and bonds.

How to Read These Comparisons

PPF vs Bank FD: PPF wins clearly on tax. FD interest is taxable every year at your slab rate; PPF interest is completely exempt. A PPF returning 7.1% is equivalent to a pre-tax FD return of about 10.1% for a 30% taxpayer. The trade-off is liquidity: FDs can be broken early (with a small penalty); PPF cannot be fully accessed for 15 years.

PPF vs NSC: NSC pays 7.7%, earns more, and also qualifies for Section 80C. However, NSC interest is taxable (though the deemed reinvestment qualifies for 80C again in subsequent years under the old regime). NSC matures in 5 years — it is better suited for a 5-year goal, not a 15-year one. PPF is the superior choice for the long run purely on tax efficiency.

PPF vs EPF: EPF pays more (8.25%) and is also EEE-exempt, making it better than PPF on raw numbers. But EPF is only available to salaried employees through payroll. For the self-employed or those wanting to invest beyond their mandatory EPF contribution, PPF fills the gap.

PPF vs NPS: NPS potentially offers higher long-term returns through equity exposure, but at maturity only 60% is tax-free; the remaining 40% must be invested in a taxable annuity. PPF gives 100% tax-free maturity. NPS is better for those targeting aggressive retirement growth; PPF is better for guaranteed, fully tax-free outcomes.

PPF vs ELSS: ELSS can significantly outperform PPF over the long term through equity returns, but with volatility. ELSS gains are taxed as LTCG at 12.5% above ₹1.25 lakh annually. PPF is the guaranteed, zero-tax alternative. In a well-constructed portfolio, both PPF and ELSS can co-exist — PPF as the stable, tax-free foundation and ELSS as the growth engine.