PPF Account Complete Guide: Interest Rate, Tax Benefits, Withdrawal Rules (2026)

Public Provident Fund (PPF) is a long-term savings scheme backed by the Government of India, introduced in 1968. It is one of the safest investment options available, offering guaranteed returns with complete tax exemption. PPF enjoys EEE (Exempt-Exempt-Exempt) status—your investment qualifies for Section 80C deduction, the interest earned is tax-free, and the maturity amount is also tax-free.

PPF is popular because it combines safety (sovereign guarantee), tax efficiency (triple exemption), and decent returns (currently 7.1% p.a.). It is available at post offices and most scheduled banks. Any Indian resident (including minors through guardians) can open a PPF account. NRIs cannot open new accounts but can continue existing ones until maturity.

As of April 2026, the PPF interest rate is approximately 7.1% per annum, compounded annually. The government reviews PPF rates every quarter based on the 10-year government bond yield. The rate is announced on the last day of each quarter for the next quarter.

Interest calculation works on monthly balances: the lowest balance between the 5th and the last day of each month is considered. This is why financial advisors recommend depositing your PPF contribution before the 5th of the month—to maximize interest for that month.

Example: If you deposit ₹1,00,000 on April 3, it earns interest from April. If deposited on April 6, interest starts from May. Over 15 years, this timing difference can result in several thousand rupees of extra earnings.

Minimum annual deposit: ₹500. Maximum annual deposit: ₹1,50,000. You can deposit in a lump sum or up to 12 instalments per year. Deposits above ₹1,50,000 are not allowed and will not earn interest.

If you fail to deposit the minimum ₹500 in any year, the account becomes 'inactive' (or 'dormant'). To reactivate, you need to pay ₹50 penalty per year of default plus ₹500 for each missed year. It is best to set up a standing instruction for automatic annual deposits.

For maximum benefit under Section 80C, invest the full ₹1,50,000 per year. If you invest ₹1,50,000 annually at 7.1% for 15 years, your maturity amount is approximately ₹40.68 lakh (total investment ₹22.5 lakh + interest ₹18.18 lakh). Use the PPF calculator to model your specific scenario.

Lock-in period: PPF has a 15-year lock-in from the date of opening. The account matures at the end of the 15th financial year. After maturity, you can extend in blocks of 5 years (with or without fresh contributions).

Partial withdrawal: Allowed from the 7th financial year onwards. Maximum withdrawal = 50% of the balance at the end of the 4th preceding year or the preceding year, whichever is lower. Only one withdrawal per year is allowed.

Loan against PPF: Available from the 3rd to 6th financial year. Maximum loan = 25% of the balance at the end of the 2nd preceding year. Interest rate on loan is PPF rate + 1%. The loan must be repaid within 36 months.

Premature closure: Allowed after 5 years only in exceptional cases: serious illness of account holder, spouse, or children, higher education of account holder or children, or change of residential status to NRI. A penalty of 1% interest rate reduction applies on premature closure.

PPF enjoys the highest level of tax efficiency in India—the EEE (Exempt-Exempt-Exempt) regime: 1. Exempt at investment: Deposits up to ₹1,50,000 qualify for deduction under Section 80C of the Income Tax Act. 2. Exempt during holding: Annual interest credited to the PPF account is completely tax-free. Unlike FD interest, there is no TDS and no inclusion in taxable income. 3. Exempt at maturity: The maturity amount (principal + interest) is fully exempt from tax. No capital gains tax applies.

This triple exemption makes PPF one of the most tax-efficient instruments in India. Compare this with bank FDs where interest is fully taxable at your slab rate, or with NPS where 40% of the corpus must be used for an annuity that is taxable as income. For conservative, tax-efficient savings, PPF is hard to beat.

PPF vs FD: PPF offers ~7.1% tax-free returns vs FD ~7% pre-tax returns. For someone in the 30% tax bracket, FD effective return is ~4.9% after tax. PPF clearly wins on post-tax returns. However, FD offers flexibility (7 days to 10 years tenure, premature withdrawal) while PPF has 15-year lock-in. For emergency funds, use FD. For long-term savings, PPF is superior.

PPF vs NPS: NPS offers equity exposure (potentially higher returns, 10-12% for aggressive allocation) and an extra ₹50,000 tax deduction under 80CCD(1B). However, NPS has a mandatory 40% annuity purchase at retirement (annuity income is taxable), and returns are market-linked (not guaranteed). PPF is fully guaranteed and tax-free. Best approach: use both—PPF for guaranteed tax-free returns and NPS for equity-linked growth.

For detailed comparison, read our EPF vs PPF vs NPS guide and use the respective calculators to model your specific numbers before deciding.

Annual contribution: ₹1,50,000 (maximum allowed) Interest rate: 7.1% per annum (compounded annually) Tenure: 15 years Total amount deposited: ₹22,50,000 Interest earned: ₹18,18,209 Maturity value: ₹40,68,209 The power of compounding is evident: you invest ₹22.5 lakh but earn over ₹18 lakh in interest. And the entire ₹40.68 lakh is tax-free.

If you extend for another 5 years (with contributions): Total invested becomes ₹30,00,000 over 20 years, and maturity grows to approximately ₹66.58 lakh. The additional 5 years add ₹7.5 lakh in contributions but ₹18.4 lakh in extra interest—compounding rewards patience.

Use the PPF calculator to model different contribution amounts, extension scenarios, and partial withdrawal impact on your final corpus.