What is Public Provident Fund (PPF)?

The Public Provident Fund (PPF) is a long-term savings scheme backed by the Government of India. Introduced in 1968, its primary objective is to mobilize small savings by offering an investment with reasonable returns combined with income tax benefits. It is considered one of the safest investment options in India because the sovereign guarantee backs both the capital and the interest earned.

Because of its EEE (Exempt-Exempt-Exempt) status, PPF is a favorite among salaried employees and business owners alike. This means your investment, the interest earned, and the maturity amount are all tax-free.

Key Features of PPF Account (2026 Updated)

Before you invest, here is a quick snapshot of the current rules:

How is PPF Interest Calculated? (The Secret Rule)

Many investors do not know this rule: The interest on PPF is calculated on the lowest balance in your account between the 5th and the last day of the month.

🚀 Pro Tip: To maximize your returns, always deposit your money before the 5th of every month. If you deposit on the 6th, you will lose interest for that entire month.

Eligibility: Who Can Open a PPF Account?

• Resident Indians: Any Indian citizen can open a PPF account in their own name.
• Minors: Parents or guardians can open an account on behalf of a minor. However, the combined limit for parent + minor remains ₹1.5 Lakh per year.
• NRIs: Non-Resident Indians (NRIs) cannot open a new PPF account. However, if they opened one before becoming an NRI, they can continue it until maturity (15 years) but cannot extend it further.
• HUFs: Hindu Undivided Families (HUFs) are no longer allowed to open PPF accounts (since 2005).

Withdrawal & Loan Facilities

While PPF has a 15-year lock-in, the government provides liquidity options in times of need:

1. Loan against PPF

You can take a loan against your PPF balance between the 3rd and 6th financial year of opening the account. The loan amount is capped at 25% of the balance at the end of the 2nd year preceding the loan application year. The interest charged is usually 1% higher than the prevailing PPF interest rate.

2. Partial Withdrawal

From the 7th financial year onwards, you can make partial withdrawals. You can withdraw up to 50% of the balance at the end of the 4th preceding year or the immediate preceding year, whichever is lower.

What Happens After 15 Years? (Maturity Options)

Once your account matures after 15 years, you have three options:

1. Close the Account: Withdraw the entire corpus and close the account. The entire amount is tax-free.
2. Extend Without Contribution: You can keep the account active for any number of years without adding new money. You will continue to earn interest on the existing balance.
3. Extend With Contribution: You can extend the account in blocks of 5 years. You must submit Form-H within one year of maturity to choose this option. This allows you to continue investing and claiming tax benefits.

Frequently Asked Questions (FAQs)

Can I open two PPF accounts?

No, an individual can have only one PPF account in their name. Opening multiple accounts is illegal, and the second account will be deactivated without interest.

Is the PPF interest rate fixed?

No, the interest rate is not fixed for the entire tenure. The Ministry of Finance reviews and declares the interest rate every quarter (every 3 months).

What happens if I miss a yearly deposit?

If you fail to deposit the minimum ₹500 in a financial year, your account will become “Inactive”. To reactivate it, you need to pay a penalty of ₹50 for each missed year plus the minimum arrears of ₹500 per year.

Can I transfer my PPF account from Post Office to a Bank?

Yes, PPF accounts are easily transferable from a Post Office to a Bank (like SBI, HDFC, ICICI) or from one bank branch to another without losing your accumulated interest.