PPF explained: interest, limits, withdrawal and tax
Written and reviewed by Omm · Last reviewed · General information, not investment advice
The Public Provident Fund (PPF) is a long-term savings scheme run by the Government of India and offered through post offices and banks. It is popular because the interest and the maturity amount are both tax-free, and the money is backed by the government.
The basic rules
- Deposit: from ₹500 to ₹1,50,000 in a financial year, in one go or in instalments.
- Term: 15 financial years. After that you can extend the account in blocks of 5 years, with or without further deposits.
- Who can open: resident individuals, one account per person.
- Interest: set by the Ministry of Finance and reviewed every quarter. See today’s rate on the government schemes page.
How the interest is worked out
Interest is calculated every month on the lowest balance between the 5th and the last day of the month, at one-twelfth of the yearly rate. It is added to your account only once a year, at the end of the financial year (31 March).
Two things follow from this:
- Deposit by 5 April if you can. A lump sum put in by the 5th of April earns interest for all 12 months of that year. The same amount spread over 12 monthly deposits earns a little less, because the later instalments sit in the account for fewer months.
- Interest is on the balance, not on your deposits alone. Interest earned in earlier years is part of the balance, so it earns interest too. That compounding is what makes the later years of a 15-year PPF grow quickly.
The PPF calculator shows this year by year and lets you switch between a yearly deposit and monthly deposits. It also uses the current notified rate, which you can change to see what a lower or higher rate would do.
Taking money out
You cannot take all your money out in the early years, which is part of the point of PPF. In outline, the scheme allows a loan against the balance in the early years, a partial withdrawal after a few years, and early closure only for specified reasons such as the account holder’s or a dependant’s serious illness or higher education, usually at a slightly lower rate. The amounts and the exact years are set by the scheme rules and can change, so check them with the bank or post office that holds your account.
Tax
Under the Income-tax Act, 2025 (in force from 1 April 2026), what you deposit in PPF counts towards the ₹1.5 lakh deduction under Section 123 (formerly Section 80C), but only if you choose the old tax regime. The interest each year and the money you receive at maturity are not taxed at all. This “exempt at every stage” treatment is why PPF is often the first place people look for the safe part of their savings.
What PPF is good and not so good at
- Good: safety, tax-free growth, discipline (it is hard to touch), and a rate that does not depend on the stock market.
- Not so good: the rate is lower than long-run equity returns, though that comes with no market risk. The money is locked in for years. The deposit limit caps how much you can put in. And because the rate changes every quarter, nobody can tell you today what your account will be worth in 15 years.
If you are weighing PPF against equity funds, read PPF vs mutual funds. To compare it with other government schemes, see government savings schemes compared. For a scheme built for a girl child, see Sukanya Samriddhi Yojana.
Scheme rules and rates are set by the Government and can change. Check the current rules with your bank or post office before you invest.