PPF Account: Complete Guide for Indian Investors (2026)

Everything about Public Provident Fund — interest rate, tax benefits, withdrawal rules, and how to maximise returns over 15 years.

1.What is PPF and why it matters

The Public Provident Fund is a government-backed savings scheme with a 15-year lock-in that currently earns **7.1% per annum**, compounded annually. It falls under the EEE (Exempt-Exempt-Exempt) tax category — your contribution (up to ₹1.5 lakh/year) is deductible under Section 80C, the interest earned is tax-free, and the maturity amount is fully tax-free. No other fixed-income instrument in India offers this triple tax benefit.

2.How PPF interest is calculated

PPF interest is calculated on the **minimum balance between the 5th and last day** of each month, compounded annually. This means if you deposit ₹1.5 lakh on April 6th, you lose interest for that month. The optimal strategy is to deposit before April 5th each year. If investing monthly, deposit before the 5th of each month. On ₹1.5 lakh/year for 15 years at 7.1%, your maturity amount is approximately **₹40.7 lakh** — ₹22.5 lakh invested, ₹18.2 lakh earned as tax-free interest.

3.Partial withdrawal and loan facility

You can take a partial withdrawal from year 7 onwards — up to 50% of the balance at the end of the 4th preceding year. You can also take a loan against PPF from year 3 to year 6, at PPF rate + 1% (currently 8.1%). After 15 years, you can extend in blocks of 5 years with or without fresh contributions. This makes PPF surprisingly flexible for a "locked" instrument.

4.PPF vs FD vs debt mutual funds

An FD at 7% for someone in the 30% tax bracket earns an effective post-tax return of 4.9%. Debt mutual funds (held 3+ years) with indexation might earn 5.5-6% post-tax. PPF at 7.1% is fully tax-free — the effective pre-tax equivalent for a 30% bracket taxpayer is **10.1%**. For the fixed-income portion of your portfolio, PPF is unbeatable up to the ₹1.5 lakh limit.

5.Key takeaway

Max out your PPF every year before April 5th. Even if you've switched to the new tax regime and can't claim 80C, the 7.1% tax-free return is still the best risk-free rate available in India. Use our PPF calculator to see exactly how your corpus grows year by year, including partial withdrawals if planned.