Understanding the Public Provident Fund (PPF)
The Public Provident Fund (PPF) is a highly secure, government-backed long-term savings scheme in India designed for retirement and tax planning. It provides a fully tax-free compounding alternative for conservative investors. It enforces a strict 15-year statutory lock-in period, promoting absolute long-term wealth creation.
Current Interest Rate: For the January–March 2026 quarter, the PPF interest rate is fixed at 7.1% p.a.
Comprehensive PPF Rules
1. Investment & Eligibility
- Deposit Limits: Minimum of ₹500 and maximum of ₹1.5 lakh per financial year (April–March).
- Installments: Deposits can be made in a lump sum or in unlimited installments.
- Interest Calculation: Calculated on the lowest balance between the 5th and the last day of each month.
- Residency: Only resident Indian citizens can open an account; joint accounts are not allowed.
- Minors: Parents or guardians can open an account for a minor, but the combined annual investment limit for parent and child is ₹1.5 lakh.
2. Maturity & Extension
- Maturity Period: 15 complete financial years from the end of the year the account was opened.
- Extension Options: After 15 years, the account can be extended indefinitely in 5-year blocks.
- With Fresh Deposits: Requires submitting Form H within one year of maturity.
- Without Fresh Deposits: The account extends automatically; the existing balance earns interest, and one withdrawal is allowed per year.
3. Withdrawal & Loan
- Partial Withdrawals: Allowed once per financial year starting from the 7th year (after 6 full years). Limit: Lower of 50% of the balance at the end of the 4th preceding year OR 50% of the preceding year's balance.
- Loans: Available from the 3rd to 6th financial year. Limit: Maximum 25% of the balance at the end of the 2nd year preceding the application. Interest: 1% higher than the prevailing PPF rate if repaid within 36 months; 6% additional if not.
- Premature Closure: Permitted only after 5 years for specific reasons like serious illness, higher education, or change in residency status. Penalty: Interest is reduced by 1% from the date of account opening.
4. Tax Benefits (EEE Category)
- Exempt (Investment): Contributions up to ₹1.5 lakh are deductible under Section 80C (available only under the old tax regime).
- Exempt (Interest): Annual interest earned is fully tax-free.
- Exempt (Maturity): The final maturity amount is completely tax-free.
Common FAQs
What does "EEE" Tax status mean?
PPF Enjoys Exempt-Exempt-Exempt status. Your initial deposit is tax-deductible (under 80C), the interest you earn annually is completely tax-free, and the final maturity amount processed after 15 years is absolutely tax-free.
Can I extend my account after 15 years?
Yes, you can extend the PPF account in blocks of 5 years indefinitely. You can choose to extend it with further fresh contributions or without further contributions while continuing to earn interest.