The Public Provident Fund (PPF) is a savings account backed by the Government of India that runs for 15 years and pays a tax-free return set every quarter. You can put in ₹500 to ₹1.5 lakh a year, the interest and the maturity amount are both fully tax-free, and each year's deposit qualifies for the Section 80C deduction. The rate for the current quarter is around 7.1%.
PPF is often the first long-term account an Indian saver opens, usually because a parent opened one for them. What makes it distinctive is not the headline rate but the combination: a sovereign guarantee, a tax-free payout, and a rate no market swing can cut.
PPF at a glance
The life of a PPF account
- Year 1Open and start depositing
- Year 3Loan against balance allowed
- Year 7Partial withdrawals allowed
- Year 15Matures, fully tax-free
- Then +5-year blocksExtend, with or without deposits
- Year 1Open and start depositing
- Year 3Loan against balance allowed
- Year 7Partial withdrawals allowed
- Year 15Matures, fully tax-free
- Then +5-year blocksExtend, with or without deposits
How does a PPF account work?
You open one PPF account in your own name at a bank or post office, and a guardian can also open one for a minor. Every financial year you deposit between ₹500 and ₹1.5 lakh, in one shot or across up to twelve instalments. Interest is calculated monthly and credited once a year.
The account has a 15-year term, counted from the end of the financial year in which you open it. Through those years the balance compounds at whatever quarterly rate the government has declared. You cannot hold two PPF accounts in your own name, and the ₹1.5 lakh ceiling applies across all your PPF accounts together, including one you run for a minor child.
What return does PPF pay?
The government sets the PPF rate every quarter, and it is the same for every account holder in the country for that quarter. For now it is around 7.1%. Because the rate is administered rather than market-linked, it does not move day to day, but it can be revised up or down at the start of any quarter.
This quarterly reset cuts both ways. In a falling-rate environment the fixed quarterly rate protects you for a few months; in a rising one, a bank fixed deposit may briefly pay more. The point of PPF is not to win the rate race but to give a predictable, tax-free base.
When can you take money out of PPF?
The 15-year lock-in is real, but it is not absolute. Two doors open along the way:
| Facility | Available from | What you can access |
|---|---|---|
| Loan against balance | 3rd financial year | A portion of the balance, repayable with interest |
| Partial withdrawal | 7th financial year | A capped share of the balance, once a year |
A loan helps in the early years when the corpus is still small; the partial withdrawal from year 7 lets you draw on the account without closing it. Full premature closure is allowed only in narrow cases, such as a serious medical need or higher education, and after five years.
How is PPF taxed?
PPF sits in the small group of instruments with EEE status: exempt on the way in, exempt as it grows, and exempt on the way out. Your yearly deposit counts toward the Section 80C deduction of up to ₹1.5 lakh, the interest is not taxed as it accrues, and the maturity amount is tax-free.
One catch is worth knowing. Because EPF, PPF, tuition fees and home-loan principal all share the same ₹1.5 lakh 80C pool, a salaried person whose EPF already fills much of that cap gets a smaller fresh 80C benefit from PPF. The tax-free growth still stands; the deduction may already be spoken for. Note too that the 80C route exists only under the old tax regime.
What happens after 15 years?
At maturity you have three choices. You can withdraw the entire balance tax-free and close the account. You can extend in blocks of five years while continuing to deposit. Or you can extend in five-year blocks without any further deposits, letting the existing balance keep earning the tax-free rate. That last option quietly turns a matured PPF into a tax-free place to park money you do not yet need.
You can model how a regular deposit grows over the full term with the PPF calculator.
Related NYVO guides
- What is EPF? Employees' Provident Fund Explained – the salaried cousin of PPF, deducted automatically from your pay.
- EPF vs PPF: What's the Difference? – how the two provident funds compare on rate, access and eligibility.
- Section 80C: The ₹1.5 Lakh Deduction Explained – the shared cap that PPF deposits count towards.
PPF is not the highest-returning thing you can own, and it was never meant to be. It is a 15-year, tax-free, government-set floor under a plan, and the reason so many Indian portfolios quietly start there.
