PPF account in India: interest rate, contribution rules, withdrawal, and how to open one

For informational purposes only. PPF interest rates are reviewed quarterly by the Finance Ministry and subject to change. Verify the current rate at indiapost.gov.in or your bank before acting.

The Public Provident Fund (PPF) is a government-backed savings scheme that has been available to Indian residents since 1968. It offers a guaranteed interest rate, full tax-free treatment on contributions, interest, and maturity (EEE), and protection from creditors. The trade-off is a 15-year lock-in.

For salaried employees who are already contributing to EPF and want a second guaranteed, tax-free retirement savings vehicle, PPF is the closest equivalent — with the key difference that it is entirely voluntary and entirely in your control.

Current interest rate and how it is set

Current rate: 7.1% per annum for Q1 FY 2026-27 (April–June 2026).

The PPF interest rate is reviewed quarterly by the Finance Ministry and announced before each quarter begins. It has been fixed at 7.1% since April 2020 — six years without a change. The rate is linked to government securities yields and can theoretically go up or down, though changes have been infrequent.

Interest is calculated on the lowest balance between the 5th and last day of each calendar month. This means deposits made before the 5th of a month earn interest for that full month; deposits after the 5th earn interest only from the following month.

Practical rule: Always deposit before the 5th of the month — especially in April — to maximise annual interest.

Source: PPF interest rate, India Post

Who can open a PPF account

• Any Indian resident (individual)
• A person can have only one PPF account in their name (two accounts are not permitted — if discovered, the second account earns no interest)
• A parent or guardian can open an account on behalf of a minor child — but the combined contribution across the adult's own account and the minor's account cannot exceed ₹1.5 lakh per year
• NRIs are not eligible to open new PPF accounts. Existing accounts opened before becoming NRI can be continued until maturity but cannot be extended.

How to open a PPF account

Where: Post offices (any branch), State Bank of India, and most major public and private sector banks (HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, and others).

Documents required: PAN card, Aadhaar, a photograph, and a cheque or digital payment for the initial deposit.

Online: Most banks allow you to open a PPF account entirely online through net banking or their mobile app. India Post also offers online PPF account opening through the Post Office Savings Bank portal.

Minimum to open: ₹500 (this is also the minimum annual contribution to keep the account active).

Contribution rules

Tax treatment: EEE

PPF is one of the few remaining EEE instruments in India:

• E — Exempt on contribution: Up to ₹1.5 lakh per year is deductible under Section 80C of the old tax regime
• E — Exempt on interest: Interest earned is fully tax-free, every year, regardless of amount
• E — Exempt on maturity: The entire maturity corpus is tax-free

This makes PPF the most tax-efficient guaranteed return instrument for old-regime taxpayers. By comparison, FD interest is taxable at your slab rate, and debt mutual fund gains are now taxable at slab rate too. A PPF earning 7.1% tax-free is equivalent to a taxable instrument earning approximately 9.9% for someone in the 30% bracket (7.1% ÷ (1 − 30%)).

Under the new tax regime: Section 80C deductions are not available, so the upfront deduction benefit disappears. However, the interest and maturity remain tax-free regardless of regime. PPF is still worth considering under the new regime if you want guaranteed, tax-free long-term savings — just without the upfront deduction.

The 15-year lock-in: withdrawal and access rules

The account matures 15 years from the end of the financial year in which the account was opened. An account opened in June 2026 matures at the end of FY 2040-41 (March 31, 2041).

Partial withdrawal (from Year 7 onwards):

• Permitted once per financial year
• Maximum: 50% of the balance at the end of the 4th year preceding the year of withdrawal, or 50% of the balance at the end of the immediately preceding year — whichever is lower
• Example: withdrawing in FY 2033-34 (Year 8): 50% of balance at end of FY 2029-30 (Year 4) or 50% of balance at end of FY 2032-33 (Year 7), whichever is lower

Loan against PPF (Year 3 to Year 6):

A loan of up to 25% of the balance at the end of the 2nd year preceding the year of loan can be taken. The loan must be repaid before another loan can be taken. Interest on the loan is 1% above the PPF rate.

Premature closure (after 5 years, for specific reasons only):

Premature closure is permitted after completing 5 financial years for:

• Life-threatening illness of the account holder, spouse, or dependent children
• Higher education of the account holder or dependent children

Premature closure attracts a 1% reduction in interest rate on the amount withdrawn.

Premature closure is not permitted for general financial needs — PPF is a genuine 15-year commitment.

What happens at maturity: extension options

At the end of 15 years, you have three choices:

Option 1: Withdraw the full corpus (tax-free)

Close the account and take everything.

Option 2: Extend with contributions (5-year blocks)

Continue contributing to the account for another 5 years (and earn interest + 80C deduction on new contributions). Can be extended multiple times.

Option 3: Extend without contributions (passive mode)

The existing balance continues to earn PPF interest without any new deposits. No 80C benefit on new contributions (since none are made), but the existing corpus keeps growing at the PPF rate, tax-free. No lock-in during this period — you can withdraw any amount at any time.

◇ Quick check: If you have an existing PPF account that matured but you have not closed it, it is likely in Option 3 (extension without contributions). Check your balance — it is still earning 7.1% tax-free. You can make partial withdrawals once a year or close it entirely.

PPF corpus at maturity: worked examples

At ₹1,50,000/year deposited on April 1 each year for 15 years at 7.1%:

Total invested: ₹22.5 lakh. Maturity value: approximately ₹40.7 lakh — fully tax-free.

For reference, the same ₹22.5 lakh in a taxable FD at 7% would yield approximately ₹37.5 lakh before tax — and you would owe income tax on the interest each year at your slab rate, reducing the net significantly.

Note: figures are approximate, computed at constant 7.1% compounded annually. Actual figures depend on exact deposit dates and any rate changes.

PPF vs VPF vs EPF: the guaranteed instruments compared

For salaried employees who want to put more into guaranteed tax-free savings beyond the mandatory EPF, VPF is strictly better than PPF on returns (8.25% vs 7.1%). The only reasons to choose PPF over VPF: you are not a salaried employee, you want the account to survive job changes without administrative action, or you want a 15-year horizon rather than a longer retirement lock-in.

Bottom line

• PPF earns 7.1% per annum (current rate, reviewed quarterly), is EEE, and is government-guaranteed
• Open at any post office, SBI, or most major banks; minimum ₹500/year, maximum ₹1.5L/year
• 15-year lock-in with partial withdrawals permitted from year 7; premature closure permitted after 5 years only for illness or education
• At maturity, you can withdraw everything tax-free or extend in 5-year blocks (with or without new contributions)
• For salaried employees already contributing to EPF: VPF at 8.25% gives better returns than PPF at 7.1% with the same EEE treatment — but PPF works if you are not eligible for VPF or want a separate account

Frequently asked questions

Q: Can I have a PPF account and also contribute to EPF and VPF?

A: Yes. These are independent instruments. The ₹1.5L annual limit on PPF is specific to PPF contributions. Your EPF and VPF contributions are separate and have their own limits.

Q: My PPF account is at a bank that I no longer use. Can I transfer it?

A: Yes. You can transfer a PPF account between post offices, between banks, or from a post office to a bank and vice versa. Submit Form SB-10(b) at the current account holder institution. The account number remains the same.

Q: I missed depositing for two years. What happens?

A: The account becomes "discontinued." To reactivate, pay ₹500 per missed year as arrears plus a ₹50 penalty per year. The account continues earning interest throughout — you just cannot make withdrawals or take loans until it is reactivated.

Q: Is PPF protected from bankruptcy or court attachments?

A: Yes. PPF balances cannot be attached by a court order except for government dues (income tax, etc.). In the event of bankruptcy, the PPF corpus is protected from creditors. This is a meaningful protection not available on FDs or mutual funds.

Q: Should I invest in PPF or ELSS for my remaining 80C?

A: This depends on your investment horizon and risk tolerance. ELSS has a 3-year lock-in and historically delivers 11–13% CAGR (not guaranteed, market-linked). PPF has a 15-year lock-in and delivers 7.1% guaranteed. For a 15+ year horizon, ELSS is expected to significantly outperform. For a guaranteed return or shorter effective horizon, PPF is more appropriate.

Sources: PPF scheme rules, India Post · PPF account rules, RBI · Section 80C, Income Tax Department

Last verified: May 2026. PPF interest rate is reviewed quarterly — verify the current rate at indiapost.gov.in before making deposit decisions.