PPF explained: The Public Provident Fund (PPF) is a government-backed savings scheme that offers tax exemption and an interest rate set by the government.
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Because of its long tenure, many people use it as part of long-term or retirement savings.
This government-backed scheme carries the EEE (Exempt-Exempt-Exempt) tax benefit – that is, the investment amount, the interest earned on it and the amount received on maturity are all tax-free. The deduction on deposits is available only under the old tax regime. Let’s see how the numbers work with an example.
Any Indian citizen can open a Public Provident Fund account in his own name at a post office or any bank. Moreover, this account can also be opened in the name of a minor child, who is looked after by a parent or guardian.
It is worth noting that only one PPF account can be opened in the name of a person. There is no facility to open a joint account in this. Therefore, if both husband and wife are working, then both can open separate accounts in their respective names. This gives a family double tax benefit and investment benefit.
Currently, the government is paying an annual interest rate of 7.1% on PPF. In fact, this interest is accumulated in the form of compound interest. That is, every year you will get interest on your principal amount and then interest will be added on that interest as well. This is how the balance compounds over time. The tenure of PPF account is 15 years, which can be extended for a period of 5-5 years.
Talking about investment, a person can deposit a minimum of ₹500 and a maximum of ₹1.5 lakh every year. If both husband and wife open separate accounts, the family can invest up to Rs 3 lakh annually. Let’s assume that you invest a maximum of Rs 1.5 lakh in PPF every year for 15 years, then after 15 years, you will get approximately Rs 40,68,209 on maturity.
In fact, out of this, about Rs 18,18,209 will be interest income only, that is, interest makes up about 45% of the maturity amount in this example. That too, completely tax-free. In simple terms, if you have deposited Rs 1.5 lakh every year for 15 years in the Public Provident Fund, your amount at maturity will be Rs 40,68,209.
The PPF rate is 7.1% for 1 Oct–31 Dec 2026, unchanged, as per Ministry of Finance (DEA) Office Memorandum F.No.1/4/2019-NS, 30 Sep 2026. Now, if you keep this amount in the account, at the current interest rate of 7.1%, the annual interest would be about Rs 2,88,842. The actual amount depends on the rate in force each quarter. After 15 years, you can also extend the account with “Extension Without Contribution”, i.e. without making any new investment.
During this period, you will continue to earn interest on the amount already deposited, i.e. your amount will continue to grow every year without adding any new money. For example, at 7.1%, a balance of about ₹40 lakh would earn roughly ₹2.88 lakh a year in interest, without any new deposit.
Why is PPF so special?
Tax-free returns: There is no tax on the interest and maturity amount.
Government-set interest: The interest rate is set by the government and reviewed every quarter.
Loan facility: It is possible to take a loan or partial withdrawal from the account if necessary.
Long-term savings: Its 15-year tenure suits long-term goals such as retirement.
This article is for education only and is not investment advice. PPF interest rates are revised by the government from time to time; the figures above are illustrative.
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