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How PPF Works: Interest, Lock-In, Withdrawal Rules

Public Provident Fund explained: interest rates, 15-year lock-in, tax benefits, partial and full withdrawal rules, maturity calculations, and extension strategy.

9 min read

TL;DR - Key Points

PPF meaningPublic Provident Fund is a long-term savings scheme backed by the Government of India. It offers guaranteed returns and tax benefits.

Lock-in periodInitial 15-year maturity from date of opening. After maturity, you can extend indefinitely in 5-year blocks.

Interest rateFixed quarterly (March, June, September, December). Currently around 7-8% per annum, varies based on government notification.

Tax treatmentAmount invested, interest earned, and maturity amount are all tax-free under Section 80C and EAA.

Annual limitMinimum Rs. 500 per financial year, maximum Rs. 1.5 lakh per financial year per account.

Partial withdrawalAllowed from 7th financial year onwards, up to 50% of balance of preceding year or 50% of balance of second preceding year, whichever is lower.

What Is PPF?

The Public Provident Fund (PPF) is a long-term savings and investment scheme offered by the Government of India through the National Savings Institute. It is designed to help salaried individuals and self-employed people accumulate a retirement corpus while enjoying tax benefits and guaranteed returns.

PPF is backed by the sovereign guarantee of the Indian government, which means your principal and interest are protected. The scheme offers a fixed interest rate announced every quarter (March, June, September, December) and has a 15-year lock-in period with the option to extend indefinitely.

The primary appeal of PPF is its combination of safety, guaranteed returns, and complete tax exemption on invested amount, interest earned, and maturity amount.

PPF Interest Rates and Current Scenario

Period	Annual Rate	Compounding Basis	Notes
Apr-Jun 2026	7.1%	7.1%	Current rate
Jan-Mar 2026	6.8%	6.8%	Previous quarter
Oct-Dec 2025	6.6%	6.6%	Earlier rate

PPF interest is credited to your account once per financial year (on March 31st). The interest is compounded annually and calculated on the lowest balance between the 5th day and the last day of each month.

Contribution Limits and Annual Investment

PPF Contribution Rules

• Minimum annual contribution: Rs. 500 per financial year
• Maximum annual contribution: Rs. 1.5 lakh per financial year
• One account per person: You can have only one PPF account
• Monthly deposits optional: You can deposit lumpsum or in multiple installments
• Account opening: Any post office or authorized bank branch

Maturity Calculations - 15-Year Projections

Annual Contribution	Period	Total Invested	Maturity @ 7.1%	Notes
Rs. 1,50,000/year	15 years	Rs. 22.5 lakh	Rs. 46.8 lakh	Max annual investment for 15 years
Rs. 1,00,000/year	15 years	Rs. 15 lakh	Rs. 31.2 lakh	Typical PPF investor
Rs. 50,000/year	15 years	Rs. 7.5 lakh	Rs. 15.6 lakh	Conservative approach
Rs. 1,50,000 (lumpsum)	15 years	Rs. 1.5 lakh	Rs. 4.8 lakh	One-time investment only

The above calculations assume consistent annual contributions and 7.1% annual interest. Actual maturity may vary based on the interest rate at the time you make deposits.

Partial Withdrawal Rules (From Year 7)

Year	Withdrawal Eligibility	Rule	Notes
1st-6th	Not allowed	Complete lock-in period	Must wait minimum 7 years
7th onwards	Up to 50% of (Yr 5 balance OR Yr 4 balance), whichever is lower	Partial withdrawal allowed	Can withdraw multiple times annually
15th year onwards	Full balance or partial (no fixed limit)	Maturity and extension period	After maturity, complete flexibility

Extension After Maturity (15+ Years)

Extension Block	Timeline	Starting Principal	Rate	Amount After Block	Notes
1st extension (years 16-20)	15	Rs. 46.8 lakh (example)	7.1%	Rs. 82.3 lakh	5-year block, same interest rate applicable
2nd extension (years 21-25)	20	Rs. 82.3 lakh	7.1%	Rs. 144.5 lakh	Continuous compounding
Unlimited	Ongoing	Grows indefinitely	Variable	Compounded perpetually	You can extend indefinitely

Tax Benefits Under Section 80C and EAA

Complete Tax Exemption

✓ Deduction on contribution: Up to Rs. 1.5 lakh invested per year under Section 80C
✓ Interest earned: Fully tax-free (Exempt-Exempt-Exempt under EAA)
✓ Maturity amount: Completely tax-free on withdrawal
✓ No TDS: No Tax Deducted at Source on interest or maturity

This triple exemption makes PPF one of the most tax-efficient investment options available to Indian taxpayers.

PPF vs Other Savings Schemes

Scheme	Lock-In	Min/Max Annual	Rate	Tax Status	Best For
PPF	15 years	Rs. 500/year - Rs. 1.5L/year	7.1%	Fully tax-free	From 7 years
NSC	5 years	Any amount - Unlimited	6.8%	Interest taxable	After 5 years
FD	Flexible	Variable - Unlimited	6-7%	Interest taxable	Anytime
Sukanya Samriddhi	21 years	Rs. 250/year - Rs. 1.5L/year	8.2%	Fully tax-free	Age 18+

Frequently Asked Questions

What is the maximum amount I can invest in PPF annually?

The maximum is Rs. 1.5 lakh per financial year (April to March). This limit applies per person per account. If you and your spouse both have PPF accounts, each can invest up to Rs. 1.5 lakh separately.

Can I withdraw money before 15 years?

Partial withdrawal is allowed from the 7th financial year onwards, up to 50% of the lower of (balance at end of preceding year) or (balance at end of second preceding year). Full premature closure before 15 years is allowed but highly discouraged as you forfeit interest benefits.

Is PPF interest tax-free?

Yes, completely. Both the principal amount invested and the interest earned are tax-free. You also get a tax deduction under Section 80C up to Rs. 1.5 lakh annually.

What happens after 15 years?

The account matures after 15 years, but you can extend it indefinitely in 5-year blocks. The interest rate during extension is announced by the government for each block.