Public Provident Fund (PPF): A Complete Guide

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Zainab Hawa

PPF Features
Section 80C
Last updated on January 25th, 2024

Warren Buffett once said, ‘Only buy something that you’d be perfectly happy to hold if the market shut down for ten years.’ Regular and systematic savings is the key to wealth creation. PPF – Public Provident Fund is a long-term investment option for investors searching for safe financial instruments. It comes with the dual benefit of tax saving and wealth accumulation. PPF is backed by the government and therefore scores high on safety. Hence, any individual looking for tax benefits along with accumulating retirement funds should open a PPF account.

What is a Public Provident Fund (PPF) Scheme?

PPF Scheme is a popular long-term savings scheme as it combines tax savings, returns & safety. The PPF scheme was initially implemented in 1968 to encourage small contributions and return on those contributions. The interest and returns earned under this scheme are not taxable under Income Tax Act. Moreover, the investor can claim the deduction under Section 80C of the Income Tax Act for the deposits in the PPF Account.

How does a PPF account work?

A PPF account can be opened by an adult for themself or on behalf of the minor. The lock-in period for PPF investment is 15 years. However at the maturity, one can extend the policy in the blocks of 5 years. The minimum investment is INR 500 and the maximum is INR 1.5 lakh per financial year. The contribution can be done in a lumpsum manner or on an installment basis. Further, the individual is mandatorily required to pay a minimum of INR 500 p.a. to keep the account in the active stage.

In case of failure of the minimum deposit in a financial year, the account will be deactivated and one will have to pay a penalty of INR 50 along with the minimum deposit of INR 500 for reactivating the account.

The interest rate applicable to PPF investment is 7.1% per financial year. Moreover, the investor has the option to continue with the account after the term has ended either with or without making new contributions. If no fresh deposits are made, interest will be calculated based on the prevailing balance at the end of the 15th year and if fresh deposits are made then interest will be calculated on the prevailing balance at the end of the 15th year plus the additional contribution.

Furthmore, if the investor does not submit an application for account closure on the maturity, it is deemed by default that the investor has intended to extend the policy for 5 more years.

Let’s Summarize PPF Scheme in the below table:

Minimum ContributionINR 500
Maximum ContributionINR 1.5 Lakh p.a.
Lock-in Period15 years
Interest Rate7.1% p.a.
Tax benefitTax deduction of up to INR 1.5 Lakhs u/s 80C


The main features of PPF are mentioned below:

Eligibility Criteria

What is the PPF Interest Rate?

Currently, the PPF interest rate is 7.1% p.a. and it is compounded every year. The interest is deposited into the investor’s account on 31st March every year and the PPF interest rate is set by Finance Ministry every year.

Calculation of PPF Interest Rate: The lowest balance between the end of the 5th day and the last day of every month is used to compute the interest rate.

PPF Withdrawal Rules

Once your PPF account reaches the maturity stage i.e., 15 years, the investor can freely withdraw the entire maturity sum. Hence, the total deposit amount along with interest will be transferred to the investor’s bank account after 15 years.

However, the policy allows partial withdrawal in case the investor is in immediate need of money. As per the PPF withdrawal rules, the investor can withdraw from the 7th year onwards i.e., the investor should have contributed till 6 years.

The maximum amount that can be withdrawn is lower of the following:

  1. 50% of the account balance at the end of the financial year, preceding the year of withdrawal, or
  2. 50% of the account balance at the end of the 4th financial year, preceding the year of withdrawal

For withdrawing funds from the Public Provident Fund, the investor needs to fill out Form C and submit the application to the relevant bank branch. The form can be obtained from the bank’s website or collected from the nearest branch.

Tax Implications on PPF

Investment under the public provident fund scheme falls under Exempt Exempt Exempt i.e., EEE category. This means that returns on the investment and interest (maturity amount) shall be fully exempt when the investor withdraws money.

Moreover, deposits under the PPF account can be claimed as deductions under Section 80C subject to the maximum contribution does not exceed INR 1.5 lakh.

The investor cannot close the PPF account prematurely. But the nominee can file a request for the closure of the account only in the case of demise of the account holder.
The investor cannot close the PPF account prematurely. But the nominee can file a request for the closure of the account only in the case of demise of the account holder.

Loan Against PPF

There is a facility for availing loans against the PPF investment. Below are the aspects one must learn before applying for a loan against PPF investment:

Interest on Loan

As it is well known, interest and loans go hand in hand. If the loan is taken before 12th December 2019, the applicable interest rate will be 2%. If the loan is taken on or after 12th December 2019, the applicable interest rate will be 1%.

One must learn the following drawbacks before applying for a loan:

How to Open a PPF Account?

You can open a PPF account through a Post office or even with a nationalized or private bank. SBI, ICICI, HDFC, etc are some of the banks offering PPF account opening facilities. You can open a PPF account either online through the bank site or offline by filing a ‘form A’ and submitting it. 

To make an online application via bank:

List of Documents required

Step-by-step process to open a PPF account online:

One can open the PPF account by below mentioned procedure:

  1. Log in to the net banking portal or mobile banking application platform

    Once you are logged in, select the option of ‘Open a PPF account’

  2. Choose Self Account or Minor Account

    If the account is for self, select the ‘self account option’, and if the account is opened on behalf of the minor, select the ‘minor account’ option.

  3. Fill out the application form

    Enter the relevant details in the application form including the nominee details and verify the documents like PAN as shown in the screen.

  4. Enter the amount you want to deposit in your PPF account

    You can choose the deposit method as lumpsum or at fixed intervals.

  5. OTP verification process

    An OTP is sent to the registered mobile number for verification. Once OTP is submitted, the PPF account is opened.

Once the account is active, you can undertake the following activities:

Closure of PPF account

Premature closure

An account holder will be allowed to close the account of themselves, the account of a minor, or the account of a person of unsound mind to whom they are guardian prematurely by making an application in Form-5 on any of the following reasons:

However, the account should not be closed before the end of 5 years from the date of opening an account.

Closure of account due to death

In the event of the death of the account holder, their nominee or legal hire will not be allowed to continue the account, the account should be closed mandatorily. Further, the interest will also be credited to the account till the end of the month preceding the month in which the balance amount of the fund is being paid to the nominee or legal hire.


Is interest on PPF taxable?

No. The deposits fall under the EEE (Exempt, Exempt, Exempt) tax category. This means that:
– Deposits made under the PPF scheme are allowed as deduction under section 80C.
– Interest earned on these deposits is exempt from tax; &
– Amount withdrawn from the PPF account is also exempt from any tax.

How many PPF accounts can I open?

You can open one PPF account every 15 years. However, at any given time, you can only have one account in your name.

Can I extend the PPF tenure?

Upon maturity, you can extend the PPF tenure in the blocks of 5 years and there is no cap on number of times on extending the tenure. Hence, you can keep on extending the tenure at the time of maturity and earn interest with or without making fresh contributions.

Can I have both EPF and PPF accounts?

Yes, an Individual can hold an EPF and a PPF account at the same time.

How to open a PPF account?

If you prefer a manual procedure, you can go to a post office. Nationalized banks and a few private banks do, however, offer online services to open PPF accounts for the convenience of the process.

Got Questions? Ask Away!

  1. During FY 2023 – 2024, I have already given a donation of Rs. 20000/- which will give me a deduction of Rs. 10000/- U/S 80G. Based on following details, what will be my likely Income Tax liability and how much additional donation should I give to bring down my tax liability to zero?

    1. Pension ……………………………… 1,03,000/-
    2. Income from house property… 80,400/-
    3. STCG ……………………………………… 65,000/-
    4. LTCG …………………………………… 1,54,000/-
    5. Divedends……………………………. 1,70,000/-
    6. Interest from banks, SGBs etc. 1,58,000/-
    7. Contribution U/S 80C ………… 1,50,000/-
    8. Medical expenses ………………. 12,000/-
  2. Thanks. I checked Income Tax Calculator suggested by you but it does not contain LTCG and STCG. How to determine applicable tax slab when LTCG and STCG are taxed at different rates? Should one add LTCG and STCG to all other income for calculating applicable slab as in the example I had given?

  3. Hi @nayakd1,

    You can enter your long-term and short-term gains under ‘capital gains’ while using the calculator.

    Capital gains are taxed at a special rate. For calculating the income slab that you fall in, this income is not taken into account.

    You need to add all the incomes that are taxed at the slab rate which includes income from salary, business, interest, dividends etc. and identify the applicable tax rate as per the slab.

    Your LTCG will be taxed at a flat rate of 10% and STCG at 15%.

    Hope this clarifies!