What is the Public Provident Fund?
The PPF is the Government of India’s flagship long-term savings scheme: you invest up to ₹1.5 lakh a financial year, the government pays a notified interest rate, and after 15 years you walk away with a corpus on which not one rupee of tax is due. Sovereign guarantee, tax-free growth, and a discipline window long enough to build real money — it is the backbone of many salaried Indians’ safe portfolios, and for the self-employed it doubles as the retirement fund an employer’s EPF would have been.
You can open a PPF account at any post office or most banks, with as little as ₹500 a year. Deposits qualify for Section 80C (old tax regime), the interest is exempt, and the maturity is exempt — the rare “exempt-exempt-exempt” treatment that survives even the new tax regime for the interest and maturity legs.
How PPF interest is calculated
Interest is computed monthly on the lowest balance between the 5th and the end of the month, but credited only once a year, on 31 March. Two practical consequences: deposit before the 5th of a month for it to earn that month, and a lump sum invested before 5 April earns the entire year. This calculator assumes that ideal — the full year’s deposit at the start of each year — which makes the balance follow the standard annuity formula (the same one behind every PPF table):
F = P × [(1 + i)ⁿ − 1] / i × (1 + i)
- P = your deposit each financial year
- i = the annual interest rate ÷ 100
- n = number of years
Worked example: invest the full ₹1,50,000 every year for 15 years at 7.1% and you put in ₹22.5 lakh — the account matures at about ₹40,68,209. That is ₹18.18 lakh of interest, all of it tax-free. If you deposit later in the year (or monthly), your real figure lands a little lower, because each rupee earns from the month it arrives.
The rate is floating — set every quarter
Unlike an FD, a PPF account does not lock its rate: the Finance Ministry notifies small-savings rates every quarter, and your entire balance earns whatever the current notification says. PPF has paid 7.1% since April 2020 (it paid 12% in the 1990s and around 8% through the 2010s), so treat any 15-year projection as exactly that — a projection at today’s rate, not a contract. The slider lets you test more pessimistic or optimistic paths; the official rate lives on the National Savings Institute site, and we re-verify it here each quarter.
PPF vs FD vs SIP
Against a bank FD, PPF wins on safety (sovereign guarantee versus DICGC’s ₹5 lakh insurance) and crushingly on tax — FD interest is taxed at your slab, so a 7% FD nets a 30%-bracket saver about 4.9%, while PPF’s 7.1% is yours entire. The FD wins on liquidity: money is reachable in days, not locked for years. Against an equity SIP, PPF trades upside for certainty — over 15 years equity has historically compounded faster, but with drawdowns PPF never sees. The classic salaried answer is not either/or: PPF as the guaranteed debt anchor, SIPs for growth on top.
After 15 years: three doors
At maturity you can withdraw everything tax-free; extend without fresh deposits (the default if you do nothing — the balance keeps compounding, one withdrawal allowed each year); or extend with deposits in 5-year blocks by filing Form H within a year of maturity. Extensions can repeat indefinitely, which is how patient savers turn a 15-year scheme into a 25–35 year tax-free machine — the tenure slider above models with-deposit extensions (20, 25, 30… years).
The fine print worth knowing
Limits: ₹500 minimum a year keeps the account active; ₹1.5 lakh is the ceiling (excess is returned without interest — and a minor child’s account shares your ₹1.5 lakh limit). Miss a year and the account goes dormant — revive it with ₹50 penalty plus the ₹500 minimum for each missed year. Liquidity before maturity: a loan against the balance in years 3–6, partial withdrawals from year 7 (up to half of an earlier balance), and premature closure only after 5 years for specific reasons (medical, education, NRI status) at a 1% rate cut. NRIs cannot open new accounts but may run an existing one to maturity, without extensions. Figures here are pre-rounding projections; your bank or post office credits interest in whole rupees each March.