PPF is a voluntary account with the Government of India. There is no employer. There is no equity. You put in money, up to a cap, for 15 years. It earns a rate the government sets every quarter. Interest and maturity are tax-free under current law. That is the whole product. Use it as a safe, long lock. Do not use it as an emergency fund or as your only retirement plan.
"PPF is not the highest-return product in the market. It is a safe, tax-clean bucket you agree not to raid.
— MoneyChanakya
The MoneyChanakya Framework
2nd W of Wealth
The Rules, Plainly
Who can open: A resident individual. One account in your name. A parent may open a separate account for a minor
Rate right now:7.1% a year for the July–September 2026 quarter. The Ministry of Finance resets this every quarter. It can stay; it can move. It is not guaranteed for 15 years at 7.1%
Floor: ₹500 in a financial year, or the account can be marked inactive
Ceiling:₹1.5 lakh in a financial year, across all PPF accounts you control (including a minor’s, where rules treat deposits as yours for the cap)
Tenure: 15 years, counted from the end of the financial year in which you opened it. After that you may extend in 5-year blocks, with or without fresh deposits
EPF is payroll. PPF is a choice. If you have no EPF, PPF is often the first sovereign bucket. If you already have EPF, PPF is extra safe space — not a second salary deduction.
How Interest Is Counted — The 5th of the Month
Interest for a month is paid on the lowest balance in the account between the 5th and the last day of that month. Money that arrives on the 6th does not earn for that month.
If you want a month’s interest on a deposit, put it in on or before the 5th. Many households transfer the year’s ₹1.5 lakh in April, before the 5th, so the full amount works for 12 months. That is a habit, not a rule you must follow — but missing the 5th is free money left on the table.
Interest is credited once a year. The 7.1% is compounded annually, not monthly in the way a savings account advertises.
Tax Treatment — Be Exact
Interest: exempt
Maturity amount: exempt under current law
Contribution deduction (80C): available only if you are in the old tax regime, and only inside the overall ₹1.5 lakh 80C cap that you may already be using for EPF, ELSS or insurance. Under the new regime, there is typically no 80C deduction for PPF. The interest and maturity can still be exempt. Do not open PPF only “for 80C” if you have shifted regime
EEE means all three stages are clean when the law still treats them that way — and when 80C actually applies to you. Check the regime you file under.
Lock-in, Loan, Withdrawal
This is not money for next year’s fees.
Loan: generally allowed from the 3rd financial year to the 6th, against a portion of the balance, with interest
Partial withdrawal: generally from the 7th financial year onward, of a limited slice of the balance — not the whole account
Full closure: at 15 years, or earlier only in listed cases (such as specified hardship), not because you found a better FD
If you might need the money in three years, do not put it in PPF. Put it in a liquid or short-debt product. PPF’s job is the decade-plus sleeve.
₹1.5 Lakh a Year for 15 Years
Teaching picture only, at a constant 7.1% (real rates will move):
Figure
You put in
₹1.5 lakh × 15 = ₹22.5 lakh
Balance after 15 years at a steady 7.1%
about ₹40 lakh if deposits are early in each year
Of which interest
about ₹17–18 lakh, and tax-free under current law
That is a useful safe sleeve. It is not a full retirement corpus. The next article is about that limit.
Did You Know?
For someone in a high tax slab on the old regime, 7.1% tax-free can beat an 8–9% taxable FD after tax. For someone on the new regime with no 80C, the comparison is only interest vs lock-in — still useful, just not a deduction product.
A Real Household Story
Revathi in Coimbatore is a designer with no EPF. She opened PPF and set a standing instruction: ₹12,500 on the 3rd of every month, so she never missed the 5th. In year six she wanted a studio deposit and asked the bank to “break PPF like an FD.” They could not. She used a gold loan instead and left the PPF untouched. At year 15 she extended it for five more years without adding much, because by then equity SIPs were doing the growth job. PPF stayed the sleeve she had promised not to spend.
MoneyChanakya Insight
Compare PPF on after-tax return and on lock-in, not on the headline rate alone. 7.1% clean can beat a higher dirty FD. It still cannot beat a 15-year equity SIP on growth — and it is not trying to.
Common Mistake
Parking next year’s school fees in PPF because “government scheme,” then discovering withdrawal rules in the year the fee is due.
Key Takeaways
Rate this quarter: 7.1%, reset every quarter — not a 15-year guarantee.
₹500 floor, ₹1.5 lakh ceiling per financial year. One account in your name.
Deposit on or before the 5th if you want that month’s interest.
15-year lock; loan and partial withdrawal only in the windows the rules allow.
Interest and maturity are tax-free under current law. 80C depends on your tax regime.
Next article: why this sleeve still should not be your only long-term investment.
Continue Your Wealth Creation Journey
Should PPF Be Your Only Long-Term Investment?
Safety is valuable — but growth still matters. Next we compare PPF with equity-oriented long-term investing.
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