What is PPF?
PPF (Public Provident Fund) is a long-term, government-backed savings scheme introduced in 1968. It offers guaranteed, tax-free returns and is one of the safest investment options for Indian residents. Accounts can be opened at post offices, SBI, and most banks.
How is PPF Interest Calculated?
PPF interest is calculated on the minimum balance between the 5th and last day of each month and credited annually on March 31. Always invest before the 5th of April to earn maximum interest.
PPF Maturity = Σ [A × ((1 + r)^n − 1) / r × (1 + r)]
A = Annual investment amount
r = Annual interest rate / 100 (currently 7.1%)
n = Remaining years for each instalment
Interest compounded annually, credited on March 31.
PPF Calculation Example
If you invest ₹1,50,000 every year for 15 years at 7.1% interest:
Annual investment: ₹1,50,000
Tenure: 15 years | Interest: 7.1% p.a.
Total invested: ₹22,50,000
Maturity value: ≈ ₹40,68,000
Interest earned: ≈ ₹18,18,000
Tax on maturity: ₹0 (100% tax-free)
Who Should Invest in PPF?
PPF is ideal for salaried employees and self-employed individuals in the 20–30% tax bracket who want guaranteed, tax-free returns with zero market risk. It's perfect for Section 80C deduction (up to ₹1.5L/year), long-term safe corpus building, and balancing equity SIP investments with stable debt.
PPF vs FD vs ELSS
PPF (7.1%, tax-free): Equivalent to ~10.1% pre-tax for a 30% bracket investor. Zero risk. FD (6.5–7.5%): Interest fully taxable — effective return drops to ~4.5–5.25% in 30% bracket. ELSS (12–15% target): Market-linked with 3-year lock-in; tax-efficient but volatile. For guaranteed, tax-free returns, PPF stands alone.
Benefits of PPF Investment
PPF is sovereign-guaranteed, has EEE tax status (fully exempt at investment, interest, and maturity), qualifies for 80C deduction, can be used as loan collateral from Year 3–6, allows partial withdrawals from Year 7, and cannot be attached by courts for debt recovery.
Related Calculators
Plan your full tax-saving portfolio with our Income Tax Calculator to see 80C savings. Use our SIP Calculator for equity investments alongside PPF. Check our FIRE Calculator to see when your combined corpus can fund early retirement.
Frequently Asked Questions
What is the current PPF interest rate in 2026-27? ⌄
7.1% per annum for FY 2026-27. The rate is reviewed and set by the Government of India every quarter. PPF has remained at 7.1% since April 2020. Being government-backed, this rate is guaranteed regardless of market conditions.
Can I invest more than ₹1.5 lakh in PPF per year? ⌄
No. The maximum annual deposit is ₹1,50,000. Any excess is returned without interest. The minimum is ₹500/year to keep the account active and avoid a penalty of ₹50 per year of default.
Can I withdraw from PPF before 15 years? ⌄
Partial withdrawals are allowed from Year 7 onwards — up to 50% of the balance at the end of Year 4 or the preceding year, whichever is lower. Full premature closure is allowed after 5 years only for specific reasons: serious illness, higher education, or change in residency status.
Is PPF interest completely tax-free? ⌄
Yes. PPF is EEE (Exempt-Exempt-Exempt): the investment qualifies for Section 80C deduction, the interest earned annually is tax-free, and the maturity amount is also fully tax-free. It is one of the very few completely tax-free instruments available to Indian investors.
When should I invest in PPF for maximum interest? ⌄
Invest before the 5th of April every year. PPF interest is calculated on the minimum balance between the 5th and last day of each month. If you invest on April 6, you lose one full month of interest. A lump sum before April 5 earns the maximum annual interest.
Can I extend PPF after 15 years? ⌄
Yes, PPF can be extended in blocks of 5 years after the 15-year maturity. You can extend with contributions (continuing to invest and earn interest) or without contributions (corpus stays invested at prevailing rate without adding more). Partial withdrawals continue to be allowed during extension.