PPF in India 2026 — The Complete Guide
The Public Provident Fund (PPF) is the most popular long-term savings scheme in India for a reason: 7.1% guaranteed, fully tax-free at every stage (EEE), backed by the Government of India. A 15-year lock-in is the price; ₹1.5 lakh per year × 15 years compounding at 7.1% becomes ₹40.68 lakh tax-free in your hand. This page walks through the rules, the timing tricks that quietly boost your maturity by tens of thousands of rupees, and the extension mechanics most people get wrong.
The PPF Rules That Actually Matter
| Rule | What it means in practice |
|---|---|
| Minimum deposit | ₹500 per FY. Below this → account becomes inactive (₹50 fee + arrears to revive). |
| Maximum deposit | ₹1,50,000 per FY across all your PPF accounts (own + minor). Anything beyond earns no interest and isn't returned. |
| Lock-in | 15 full financial years from the FY of account opening. Extendable in 5-year blocks indefinitely. |
| Interest calculation | Lowest balance between the 5th and last day of each month, summed across 12 months, credited on 31 March. |
| Tax treatment | EEE — Section 80C deduction on deposit (old regime), Section 10(11) exempt on interest, tax-free maturity. |
| Loan | Year 3 to year 6. Up to 25% of balance at end of FY-2. Rate = PPF rate + 1%. Repay in ≤ 36 months. |
| Partial withdrawal | From year 7. Up to 50% of balance at end of FY-4 (or FY-1, whichever is lower). Once per FY. |
| Premature closure | Allowed after 5 full years for medical emergency, higher education, or change of residency. 1% interest penalty over the entire period. |
The 5th-of-Month Trick That Quietly Boosts Maturity
Interest is credited on the lowest balance between the 5th of the month and the end of the month. The implication:
- Deposit before 5 April → that ₹1.5 lakh earns interest for the entire FY.
- Deposit on 6 April → that ₹1.5 lakh earns interest for only 11 months that year.
- Monthly SIP of ₹12,500 → each instalment earns interest for (12 − month_index) months on average.
Over the full 15-year cycle at 7.1%, the difference between "lump sum on 1 April" vs "12 monthly instalments" is roughly ₹64,000 in maturity for the same ₹22.5 lakh invested. Not life-changing — but free money if you happen to have the cash on 1 April.
Worked Examples
Example 1: Full cap, full tenure, lump-sum
- Deposit: ₹1,50,000 on 1 April every year for 15 years
- Rate: 7.1% throughout
- Total invested: ₹22,50,000
- Maturity: ₹40,68,209
- Interest earned (tax-free): ₹18,18,209
- Annual 80C tax saving (30% slab): ₹46,800 × 15 = ₹7,02,000 lifetime
Example 2: ₹5,000/month for 25 years (with one extension)
- Deposit: ₹60,000/year for 25 years (15 base + 2 extensions)
- Total invested: ₹15,00,000
- Maturity: ₹40,53,194 (annual compound at 7.1%)
- The 10-year extension nearly doubles the maturity for only an extra ₹6 lakh of deposits — that's compounding doing the work.
Example 3: Minor child's PPF — long horizon advantage
- Open at child's age 5, contribute ₹1.5 lakh/year, mature at child's age 20
- Total invested: ₹22,50,000
- Maturity: ₹40,68,209 tax-free
- Combined cap reminder: this ₹1.5 lakh counts against your own ₹1.5 lakh limit too — you cannot deposit ₹1.5 lakh in both your account and the minor's.
Extension: With Contribution vs Without (Form H)
At the 15-year mark you have three doors:
- Withdraw everything and close — maturity is tax-free, lump-sum in hand.
- Extend with contributions (submit Form H within 1 year of maturity) — keep depositing up to ₹1.5 lakh/year for another 5 years. You can withdraw up to 60% of the opening balance during this extension block.
- Extend without contributions (do nothing) — account silently rolls over. Balance keeps earning the prevailing PPF rate. One withdrawal of any amount allowed per FY.
The default if you forget to act is option 3 — which is actually fine, but it locks you out of option 2 forever (you cannot start fresh contributions once the no-contribution mode is set for that 5-year block). Submit Form H if there's any chance you'll want to keep depositing.
PPF vs ELSS vs NPS — Where PPF Wins
| Feature | PPF | ELSS | NPS (Tier I) |
|---|---|---|---|
| Return | 7.1% guaranteed | ~12-14% (market) | ~9-11% (mixed) |
| Lock-in | 15 years (with annual liquidity from year 7) | 3 years | Until age 60 |
| 80C deduction | ₹1.5L (old regime) | ₹1.5L (old regime) | ₹1.5L + ₹50K (80CCD(1B)) |
| Interest/gain tax | 0% | 10% LTCG over ₹1.25L | Fully taxable annuity portion |
| Maturity tax | 0% (EEE) | 10% LTCG | 60% tax-free, 40% annuity (taxable) |
| Sovereign guarantee | Yes | No (market risk) | No (market-linked) |
PPF is the only instrument here with a sovereign guarantee, true EEE status, and full liquidity from year 7. It does not beat ELSS over 15 years on raw return, but it does beat ELSS on after-tax, risk-adjusted return for the debt allocation. A common allocation for salaried Indians under the old regime: ELSS for ₹1L of the 80C, PPF for the remaining ₹50K — best of both.
Common Mistakes That Cost Real Money
- Depositing after 5 April. One day late costs you a full month of interest on the deposit. Set a calendar reminder for 1 April every year.
- Crossing the ₹1.5 lakh combined cap. Excess in the minor's + own account doesn't earn interest and isn't refunded — it sits dead.
- Forgetting Form H within 1 year of maturity. The account auto-extends without contribution — you cannot reopen the contribution window for that 5-year block.
- Premature closure for non-qualifying reasons. Only medical emergency, higher education, or NRI status qualify after year 5. Other reasons → application rejected.
- Switching to the new tax regime then continuing ₹1.5L PPF deposits. Under the new regime there's no 80C deduction; PPF still pays 7.1% tax-free but the tax saving lever disappears. At 30% slab, you give up ₹46,800/year of immediate tax saving.
- Treating PPF as an emergency fund. First withdrawal is year 7. PPF is debt allocation, not liquidity.
Frequently Asked Questions
What is the PPF interest rate today?
7.1% per annum, compounded annually, for Q1 FY 2026-27 (April-June 2026). The rate has been unchanged since April 2020.
Can I open more than one PPF account?
No — one self account per individual. You may also open a PPF account in the name of each minor child, but the ₹1.5 lakh annual cap is shared across all accounts you operate.
Can NRIs open or continue PPF?
NRIs cannot open new PPF accounts. If you become an NRI after opening, you can continue the account till maturity but cannot extend it after the 15-year mark.
Is PPF better than fixed deposits?
For long horizons under the old tax regime: yes. A 7% FD at the 30% slab gives only 4.9% post-tax. PPF at 7.1% is tax-free → effective ≈ 10.1% pre-tax equivalent at the 30% slab.
How is PPF taxed under the new regime?
No 80C deduction is available, but the interest and maturity remain fully tax-exempt under Section 10(11). PPF is still attractive in the new regime as a guaranteed 7.1% tax-free debt instrument — you just lose the upfront deduction.
Can I deposit more than ₹1.5 lakh into PPF?
You can technically deposit more by mistake, but anything above ₹1.5 lakh/year earns 0% interest and is returned without interest at maturity. Banks now block these deposits at the counter in most cases.
What happens if I miss the minimum ₹500 deposit?
The account becomes "inactive". To revive: pay ₹50 penalty per missed year + ₹500 minimum deposit for each missed year. The account continues to earn interest while inactive but you cannot take loans or partial withdrawals from an inactive account.