Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a long-term, government-backed savings scheme in India designed to provide secure, tax-free returns. It is one of the most popular investment options for risk-averse individuals, offering a sovereign guarantee on both the principal and the interest earned.

Current Key Rates & Limits (FY 2025–26)

• Interest Rate: 7.1% per annum, compounded annually.
  • Rates are reviewed and announced by the Ministry of Finance every quarter.

About Public Provident Fund (PPF)

• It is a long-term, government-backed savings-cum-tax-saving instrument in India, designed to provide retirement security with guaranteed returns and high safety.
• Investment Amount:
  • Minimum: ₹500 per financial year.
  • Maximum: ₹1.5 lakh per financial year.
• Tenure: Mandatory lock-in period of 15 years, which can be extended indefinitely in 5-year blocks with or without further contributions.
• Eligibility: Only resident Indian individuals (including minors through guardians) can open an account. NRIs and HUFs are not eligible for new accounts.
• Tax Benefits (EEE Status): PPF follows the Exempt-Exempt-Exempt (EEE)model, meaning it is tax-free at all three stages:
  • Investment: Deposits up to ₹1.5 lakh are deductible under Section 80C (available only under the old tax regime).
  • Interest: The interest earned annually is fully exempt from income tax.
  • Maturity: The entire maturity amount, including principal and interest, is tax-free.
• Liquidity: Loans and Withdrawals
  • Loan Facility: Available from the 3rd to the 6th financial year. You can borrow up to 25% of the balance held at the end of the second preceding year.
    • Partial Withdrawal: Permitted from the 7th financial year onwards. The limit is 50% of the balance at the end of the 4th preceding year or the preceding year, whichever is lower.
• Premature Closure: Allowed after 5 years only for specific reasons like life-threatening illness or higher education, subject to a 1% interest rate penalty.