What is PPF?
Public Provident Fund (PPF) is a 15-year long-term savings scheme backed by the Government of India. It's one of the most popular instruments for conservative Indian savers because of the combination of government guarantee, reasonable tax-free return, and triple-E tax treatment.
Key features
- Lock-in: 15 years from account opening (extensions in 5-year blocks; partial withdrawal allowed from year 7).
- Interest rate: Currently ~7.1% per annum (reviewed quarterly by the Ministry of Finance).
- Deposits: ₹500 minimum, ₹1.5 lakh maximum per financial year. Anything above ₹1.5 L is rejected.
- Tax treatment: EEE — contribution deductible under Section 80C, interest is tax-free, maturity is tax-free.
- Eligibility: Any resident Indian adult. You can also open a PPF on behalf of a minor child (separate from SSY).
- Opening: Any authorised bank (SBI, HDFC, ICICI, Axis, etc.) or post office.
How the calculator works
PPF interest compounds annually on the closing balance.
For each year:
balance = (balance + yearly_deposit) × (1 + rate)
At ₹1.5 L/year deposit and 7.1% interest:
| Horizon | Total invested | Maturity value |
|---|---|---|
| 10 years | ₹15 L | ~₹22 L |
| 15 years | ₹22.5 L | ~₹40.7 L |
| 20 years | ₹30 L | ~₹66.6 L |
| 25 years | ₹37.5 L | ~₹1.03 Cr |
PPF's tax-free nature is worth 20–30% more than the nominal rate suggests, depending on your tax bracket.
PPF vs PPF-equivalent alternatives
| Instrument | Return | Tax | Lock-in | Risk |
|---|---|---|---|---|
| PPF | ~7.1% | Tax-free | 15 yrs | Sovereign guarantee |
| SSY (girl child only) | ~8.2% | Tax-free | 21 yrs | Sovereign guarantee |
| EPF | ~8.25% | Tax-free | Until retirement | Sovereign guarantee |
| ELSS (equity-linked) | ~11–13% historical | 12.5% LTCG | 3 yrs | Market |
| Equity mutual fund | ~11–13% historical | 12.5% LTCG | Flexible | Market |
PPF is the bedrock of the "guaranteed tax-free" bucket of an Indian household's portfolio. Most NYVO clients combine PPF + equity MFs — PPF for the guaranteed slice of long-term goals, equity for the growth slice.
How to open a PPF account
- Walk into any authorised bank or post office with Aadhaar, PAN, and a passport-size photo.
- Fill Form A (single-name PPF opening) or Form A1 (for minor accounts). Online opening is available at most banks.
- Initial deposit of ₹500 or more.
- You'll receive a passbook with the account number and a starter amount balance.
After opening, top up anytime via net banking, UPI (some banks), or branch cash — up to the ₹1.5 L annual cap.
Tax math
Section 80C: Your yearly PPF deposit is deductible under Section 80C (combined limit ₹1.5 L with EPF, ELSS, tuition, insurance premium, home loan principal, etc.). If your 80C is already full from EPF + home loan principal, the PPF deduction benefit is zero — you're depositing "post-tax" rupees.
Interest & maturity: Both tax-free. This is PPF's key advantage over FDs (slab-rate taxed) and debt mutual funds (also slab-rate post-April 2023).
Common mistakes
- Depositing more than ₹1.5 L. Excess is rejected but can delay the current year's interest credit. Stay within the cap.
- Treating PPF as a savings account. Partial withdrawal is allowed only from year 7 onwards, and with restrictions. Don't park emergency money in PPF.
- Ignoring the 5-year extension option. After 15 years, you can extend in 5-year blocks (with or without fresh deposits) — interest continues compounding. Many investors close unnecessarily at 15 years.
- Maxing 80C on PPF alone when ELSS would do better. ELSS has a 3-year lock-in and ~11–13% historical returns vs PPF's 7.1%. For young investors with risk tolerance, ELSS is often the better 80C slot.
Frequently asked questions
Can I have multiple PPF accounts? No. One PPF account per person. A minor's account is separate from the parent's.
Can NRIs open PPF? No new PPF accounts after becoming NRI. Existing accounts continue till maturity (no extension).
What if I miss a year's deposit? Account becomes inactive; reactivate with a ₹50 penalty plus minimum ₹500 contribution for each missed year.
Can I transfer PPF to another branch/bank? Yes. Form G at the old branch, then present at new branch. Takes 3–5 working days.
Is PPF loan facility useful? You can borrow against your PPF between years 3–6 at 1% above PPF rate. Useful for emergencies, but repay within 36 months or forfeit some interest on the principal.
