Public Provident Fund (PPF) in India: Complete Guide to the 15-Year Savings Scheme

When you think about saving for retirement in India, the Public Provident Fund (PPF) is one of the first things you’ll hear about. And for good reason. Since 1968, this government-backed scheme has helped over 100 million Indians build tax-free wealth with near-zero risk. It’s not flashy. It doesn’t promise quick returns. But if you’re serious about securing your future, PPF is one of the most reliable tools you have.

What Exactly Is a PPF Account?

A Public Provident Fund account is a long-term savings scheme run by the Indian government. It’s designed to encourage regular savings with guaranteed returns and serious tax benefits. You open it at a post office or authorized bank - like SBI, ICICI, or HDFC. Once you open it, you commit to saving for 15 years. That’s not a suggestion. It’s the rule.

Every year, you must deposit at least ₹500 and can put in up to ₹1.5 lakh. The government sets the interest rate quarterly - for 2025-26, it’s 7.1% per year, compounded annually. That’s higher than most fixed deposits. And here’s the kicker: every rupee you put in, every bit of interest you earn, and the entire amount you withdraw at maturity is completely tax-free. That’s called EEE status - Exempt, Exempt, Exempt.

Why PPF Beats Other Savings Options

Let’s compare PPF to other common choices.

• Fixed Deposits (FDs): FDs give you around 6-7% interest, but you pay tax on the interest every year. PPF gives you the same or better returns - tax-free.
• Equity Mutual Funds: These can give you 12%+ returns, but they’re volatile. PPF gives you steady, predictable growth. No market crashes to worry about.
• NSC or KVP: These are also government schemes, but they have lower limits and shorter terms. PPF lets you invest more and for longer - which matters when you’re planning for retirement.

PPF isn’t about beating the market. It’s about building a safety net that won’t vanish overnight. If you’re 30 and start investing ₹1.5 lakh a year in PPF, by age 45, you’ll have over ₹40 lakh - all tax-free. That’s not magic. That’s compound interest working over time.

How to Open a PPF Account

Opening a PPF account is simple. You need:

1. Your Aadhaar card or PAN card
2. A valid ID proof (driver’s license, passport, etc.)
3. A recent passport-sized photo
4. Your bank account details (if opening through a bank)

You can open it at any branch of SBI, PNB, ICICI, HDFC, or at your nearest post office. Some banks let you do it online through net banking - just look for the PPF option under ‘Investments’.

You can open only one PPF account in your name. But you can open one for your minor child - and even claim tax deductions for their contributions. That’s a smart way to start building their future too.

How Much Can You Deposit and When?

You can deposit between ₹500 and ₹1.5 lakh per financial year (April 1 to March 31). You can make up to 12 deposits in a year - so you can pay monthly, quarterly, or whenever you have cash. But here’s the trick: to maximize interest, deposit before the 5th of each month. Interest is calculated on the balance between the 5th and the last day of the month. Put money in on the 6th? You lose interest for that month.

Example: If you deposit ₹1.25 lakh in April, you earn interest on the full amount for 12 months. If you wait until November, you only earn interest for 5 months. That’s a difference of over ₹4,000 in a single year.

How PPF Interest Works

PPF interest is compounded annually, but calculated monthly. The government announces the rate every quarter. In 2025, the rate is 7.1%, down from 7.6% in 2023. That’s still higher than bank FDs after tax.

Here’s how it grows:

• Year 1: Deposit ₹1.5 lakh → Interest: ₹10,650 → Total: ₹1,60,650
• Year 5: Deposit ₹1.5 lakh/year → Total balance: ₹8,70,000
• Year 10: Total balance: ₹21,50,000
• Year 15: Total balance: ₹38,75,000

That’s ₹38.75 lakh from ₹22.5 lakh invested. And you never paid a single rupee in tax.

Withdrawals and Loans - What’s Allowed?

You can’t touch your PPF money before 15 years. But there are two exceptions:

Loans (Years 3 to 6)

After the third financial year, you can take a loan against your PPF balance. The maximum loan is 25% of the balance at the end of the second year. Interest on the loan is 1% higher than the PPF rate. You must repay it within 36 months. If you don’t, the loan amount gets deducted from your maturity proceeds.

Partial Withdrawals (After Year 7)

From the seventh year onward, you can withdraw up to 50% of the balance at the end of the fourth year before the withdrawal year. You can do this once a year. Example: If your balance at the end of year 4 was ₹6 lakh, you can withdraw up to ₹3 lakh starting year 7. You can’t withdraw more than that, even if your balance grows.

These rules are strict. No early withdrawals for emergencies. No withdrawals for buying a house or paying medical bills. That’s intentional. PPF is built to force discipline.

Extending Your PPF Account

After 15 years, you don’t have to close it. You can extend it in blocks of 5 years. You have two choices:

• Continue with contributions: You can keep depositing up to ₹1.5 lakh/year. You can also withdraw up to 60% of the balance at the start of each 5-year block.
• Continue without contributions: You leave your money in, keep earning interest, and can withdraw any amount once a year. No new deposits.

Many retirees choose the second option. Their PPF becomes a steady, tax-free income stream. No need to sell stocks or dip into emergency funds.

What Happens If You Die?

If you pass away before maturity, your nominee or legal heir gets the entire balance. No lock-in. No delays. They just need to submit a death certificate and claim form. The amount is tax-free to them too.

PPF vs. EPF vs. NPS - Which Is Better?

Let’s break down the big three retirement schemes:

PPF wins if you want simplicity, safety, and zero taxes. EPF is great if you’re employed - but you lose control when you switch jobs. NPS offers higher returns but comes with tax on withdrawal and market risk. Most people use PPF as their core, EPF as their employer bonus, and NPS as a bonus layer.

Common Mistakes People Make

• Waiting too long to start: If you start at 40, you’ll have only ₹18 lakh by 55. Start at 25, and you’ll have ₹52 lakh. Time is your biggest advantage.
• Depositing late: Putting money in after the 5th of the month costs you interest. It’s free money you’re throwing away.
• Assuming it’s only for retirement: PPF is also a great tool for your child’s education, marriage, or buying land. Just plan the extension wisely.
• Opening multiple accounts: It’s illegal. If caught, all accounts get closed and interest is forfeited.
• Ignoring extensions: Don’t just close it at 15. Let it keep earning 7.1% tax-free for another 5 or 10 years. That’s pure growth.

Who Should Not Use PPF?

PPF isn’t for everyone. Skip it if:

• You need access to your money within 5 years
• You’re already maxing out your NPS and EPF and want higher returns
• You’re in a very high tax bracket and need more flexibility than PPF offers

But for 90% of Indian savers - especially those who want a simple, safe, tax-free retirement fund - PPF is the gold standard.

Final Tip: Make It Automatic

The easiest way to succeed with PPF is to set up an auto-debit. Link it to your savings account and schedule ₹12,500 to transfer on the 1st of every month. That’s ₹1.5 lakh a year - done. No thinking. No forgetting. No last-minute rushes. Just steady, powerful growth.

PPF doesn’t make you rich overnight. But if you stick with it, it makes sure you never run out of money when you stop working.