What is the Public Provident Fund (PPF) in India?
Statutory sovereign small savings scheme governed under PPF Scheme, 2019The Public Provident Fund (PPF) is a long-term, government-backed small savings scheme in India established under the Public Provident Fund Act, 1968 (currently governed under the Public Provident Fund Scheme, 2019). It was introduced by the Central Government to provide a safe, risk-free investment avenue with guaranteed returns for Indian citizens while fostering retirement discipline.
PPF is widely regarded as one of India's most popular tax-saving options due to its Exempt-Exempt-Exempt (EEE) status under Section 80C and Section 10(11). Any resident Indian individual (including parents opening on behalf of a minor child) can open a single PPF account at authorized bank branches or post offices.
Guaranteed directly by the Ministry of Finance, Government of India—zero credit default risk. Balances cannot be attached by any civil court decree for commercial debts or insolvency under Section 60(1)(ka) of the CPC (subject to statutory claims or attachment orders issued in recovery proceedings for tax arrears under the Income-tax Act).
The account legally matures after 15 full financial years calculated from the end of the opening FY (16 deposit-eligible FYs total), extendable indefinitely in 5-year blocks under Form 4 (model up to 4 blocks / 36 FYs in this tool).
Sovereign EEE framework: Section 80C & Section 10(11) rules
Tax exemption mechanics across Old vs New Tax Regimes (with 4% cess)1. Deposit deduction (Section 80C + 4% cess - Old Regime only)
Annual deposits up to ₹1,50,000 qualify for deduction from taxable income under Section 80C under the Old Tax Regime. Factoring in the mandatory 4% Health & Education Cess, investors in the 20% slab save ₹31,200 annually, while those in the 30% slab save ₹46,800. The default New Tax Regime (Section 115BAC) disallows Section 80C deductions.
2. Tax-free interest & maturity (Section 10(11) - both regimes)
Unlike bank FDs where interest incurs annual TDS, all accrued PPF interest and final maturity proceeds are 100% tax-free under Section 10(11), irrespective of whether you opt for the Old or New Tax Regime.
3. Combined minor account ceiling rule
If a parent opens a PPF account for themselves and another on behalf of a minor child, the combined annual deposit across both accounts cannot exceed ₹1.5 Lakh. Excess funds earn 0% interest and are refunded without interest.
How to use the PPF calculator (basic & advanced guide)
Step-by-step framework for statutory planning and extension modeling1 Select opening financial year & contribution frequency
Select your account opening FY (e.g. FY 2026–27) to align with Paragraph 13(1) of the PPF Scheme, 2019. Choose between Yearly Lump Sum and Monthly SIP (by the 5th) to match your real cash flow.
2 Optimize with the 5th of the month rule
For yearly depositors, depositing on or before April 5th captures a full 12 months of interest on that year's deposit. Depositing after April 5th drops April's interest, yielding only 11 months. For monthly depositors, depositing on or before the 5th of each month ensures that installment earns interest for that calendar month.
3 Plan 5-year extension blocks via Form 4
Under Paragraph 13(2), accounts can be extended indefinitely in 5-year blocks. You can model up to 4 consecutive blocks in this tool (up to 36 financial years) with or without fresh contributions.
4 Inspect statutory loan & withdrawal limits
Slide the audit year to inspect loan caps (Yrs 3–6, max 25% of balance 2 years prior at PPF + 1% interest) and partial withdrawal limits (Yrs 7–16: 50% rule; extension blocks: cumulative 60% cap of commencement balance).
Compounding mathematics of PPF
Underlying arithmetic for annual compounding, monthly SIP, and timing accrualsAnnuity-due model where annual contributions deposited on/before April 5th compound for all 12 months across n financial years (factor 1.0).
Installment k earns for (13 − k) months. Total 78 installment-months out of 144 yields effective factor 6.5/12 ≈ 0.54167 on annual sum.
Depositing after April 5th forfeits April's interest on that year's deposit, applying an 11/12ths factor that causes compounding loss over 16 FYs.
Side-by-side comparison: PPF vs ELSS vs NPS
Key trade-offs across India's primary tax-saving investment vehicles| Feature |
Sovereign PPF
|
ELSS mutual funds | National Pension System (NPS) |
|---|---|---|---|
| Risk profile | Zero risk (sovereign guaranteed) | High (equity market linked) | Moderate (market linked) |
| Expected returns | 7.1% (quarterly notified) | 12%–15% historical CAGR* | 9%–12% asset allocation CAGR* |
| Tax deductions | Sec 80C (up to ₹1.5L) | Sec 80C (up to ₹1.5L) | Sec 80C (₹1.5L) + Sec 80CCD(1B) (₹50K extra, Old Regime only) + Sec 80CCD(2) employer contrib.* |
| Tax status | EEE (100% tax-free) | 12.5% LTCG on gains > ₹1.25L | 60% tax-free lump sum; 40% taxable annuity |
| Lock-in period | 16 Full FYs (liquidity rules apply) | 3 years (shortest in Sec 80C) | Until age 60 (retirement) |
*Disclaimer: ELSS mutual funds and NPS are market-linked instruments. Past performance is not indicative of future returns. Section 80CCD(1B) deduction is exclusively available under the Old Tax Regime, whereas employer contribution under Section 80CCD(2) is available in both regimes up to statutory salary caps (10% for private sector, 14% for government employees).
*Sec 80CCD(1B) is Old Regime only. Sec 80CCD(2) employer deduction is available in both regimes.
Frequently asked questions
Key rules on account opening, extensions, liquidity, and taxation1. Where can I open a PPF account in India?
You can open a PPF account at designated Post Office branches (India Post) across the country or at authorized public and private sector bank branches (such as SBI, ICICI Bank, HDFC Bank, Axis Bank, Bank of Baroda, and PNB). Most major banks allow online account opening through internet banking or mobile apps.
2. Is PPF interest completely tax-free under both Old and New Tax Regimes?
Yes. Under Section 10(11) of the Income Tax Act, both the annual interest earned and the final maturity amount are 100% tax-free under BOTH the Old and New Tax Regimes. The annual deposit deduction of up to ₹1.5 Lakh under Section 80C is available under the Old Tax Regime only.
3. Can I extend my PPF account after statutory maturity?
Yes. Under the Public Provident Fund Scheme, 2019, you can extend your account indefinitely in blocks of 5 financial years. To continue fresh deposits, submit Form 4 (formerly Form H under the 1968 scheme) to your bank or post office within one year of statutory maturity.
4. Can I take a loan or make partial withdrawals from PPF?
Yes. Loans are available between the 3rd and 6th financial year (capped at 25% of the balance two years prior) at PPF rate + 1% if repaid in 36 months (penal rate +6% thereafter). Partial tax-free withdrawals are permitted once per financial year from the 7th year onwards (capped at 50% of the relevant prior balance). During 5-year extension blocks with contributions, cumulative withdrawals are permitted up to 60% of the balance at the commencement of each block.
5. What are the minimum and maximum annual deposit limits for a PPF account?
The minimum deposit required to keep a PPF account active is ₹500 per financial year, while the maximum allowable statutory deposit is ₹1,50,000 per financial year across self and minor accounts combined.
6. What happens if I deposit more than ₹1.5 Lakh in my PPF account in a financial year?
Any amount deposited beyond ₹1,50,000 in a single financial year will not earn any interest, nor will it qualify for tax deduction under Section 80C. The excess deposit amount is refunded without interest to the account holder.
7. Is premature closure of a PPF account allowed before statutory maturity?
Premature closure is permitted after completing 5 full financial years for specific statutory grounds under Paragraph 13(3): (1) treatment of life-threatening illnesses of self, spouse, dependent children or parents; (2) higher education of the account holder or dependent children; or (3) change of tax residency status of the account holder (on submission of passport, visa or PR card), subject to a 1% interest rate penalty deduction across all active years.