Public Provident Fund in India: Benefits, Interest Rates & Tax Perks Explained!

Updated on: 10 Apr 2025

The Public Provident Fund (PPF) is a great way to save and grow your money with guaranteed returns and tax benefits. It’s a government-backed scheme that helps you build wealth over time and is completely tax-free.

Read more to understand its benefits, interest rates and tax perks in a simple way.

What is PPF and Considered a Smart Choice?

Public Provident Fund (PPF) is a secure, long-term investment backed by the government. The meaning of PPF lies in its role as a tax-free, risk-free savings option with guaranteed returns. It offers tax benefits under Section 80C, making it ideal for stable wealth growth. With a 15-year lock-in period, it promotes disciplined savings, while partial withdrawals and loan options add flexibility. Whether for retirement or future goals, PPF remains a trusted choice for investors seeking safety, steady returns, and tax efficiency in their financial portfolio.

What are the Key Features of PPF Account?

The government backs Public Provident Fund in India, making it a trusted choice for cautious investors:

Tenure: Minimum 15 years, extendable in 5 year blocks
Investment limits: ₹500 to ₹1.5 lakh annually
Opening balance: Open with ₹100, max. ₹1.5 lakh
Deposit frequency: Minimum 1 deposit yearly for 15 years
Mode of deposit: Cash, cheque, demand draft or online transfer
Nomination: Assign a nominee during or after account opening
Joint accounts: Only individual accounts are allowed and not joint accounts
Risk factor: Government-backed, risk-free, with guaranteed returns
Tax benefit: Interest and maturity amounts are tax-exempt under PPF benefits
Partial withdrawal: Allowed from the 5th financial year onward.

Eligibility Criteria for PPF Account

After knowing about what is PPF, if you want to start a PPF account, you must meet the following requirements:

Only Indian citizens can open a PPF account
Each person can have only 1 account
Second account is allowed only for a minor
NRIs cannot open new accounts but existing ones remain active
NRIs cannot extend their PPF accounts after maturity
HUFs (Hindu Undivided Families) are not eligible for PPF

How Does a PPF Account Work?

It is easy to open a PPF account and you can do it easily at any financial institution. You can add money to it at any time of the year to keep it current, enjoying all the PPF benefits. Here’s how a PPF account works:

Deposits: You can deposit ₹500 to ₹1.5 lakh every financial year. Deposit by cash, check, demand draft or internet transfer. You can deposit 12 times annually.
Interest calculation: To calculate interest on a PPF account, add it up annually after the fiscal year. The lowest sum from the 5th until the end of the month defines the balance.

Partial withdrawals: Withdraw up to 50% of the amount at the end of the 4th year (or prior year), commencing with the 6th financial year. Once a year, you can withdraw money from the PPF account.
Maturity: After 15 years, a PPF account owner can withdraw the principal and interest. With or without donations, you can keep the account active for 5 years following maturity.

How to Open a PPF Account?

You can open a PPF account in both offline and online ways. To open the account, follow the below listed easy steps:

Steps to Open a PPF Account Offline:

Visit a post office or any authorised bank near you, like the State Bank of India or ICICI Bank
Fill out the account opening form
Submit a few documents like proof of identity (Aadhaar, voter ID) and a picture mainly a passport size
Deposit your 1st instalment to activate your account

Steps to Open a PPF Account Online:

Use your bank’s online or mobile banking app to log in
Click on ‘Open PPF Account’
Fill out all the required information and submit it
You will get an OTP on the registered phone number to confirm
Make the 1st transaction and activate your PPF account

Loan and Withdrawal Against PPF

You can take a loan after 1 year.
You can borrow up to 25% of your balance.
A second loan is allowed after repaying the first one.
The interest is 1% for up to 36 months.
If the loan exceeds 36 months, the interest increases to 6%.

PPF and Tax Benefit

The Public Provident Fund (PPF) offers great tax benefits while helping you save for the future. Under Section 80C of the Income Tax Act, you can claim a deduction of up to ₹1.5 lakh per financial year on your PPF contributions. This reduces your taxable income, helping you save on taxes.

Additionally, PPF falls under the EEE (Exempt-Exempt-Exempt) category, meaning the:

money you invest is eligible for a tax deduction
interest earned is completely tax-free
amount you receive at maturity is also tax-free

Conclusion

Full form of PPF, the Public Provident Fund, remains a top investment choice for long-term financial security in India. For your first investment in PPF, it offers guaranteed profits, no taxes, and high levels of protection.

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