PPF

Full form: Public Provident Fund

Savings & Deposits

PPF is a government-backed long-term savings scheme offering a guaranteed 7.1% annual return with complete EEE tax exemption (deposits, interest, and maturity all tax-free). It has a 15-year lock-in with partial withdrawals from year 7.

In detail

PPF enjoys EEE (Exempt-Exempt-Exempt) tax status: investment qualifies for Section 80C deduction (up to Rs 1.5L), interest is completely tax-free, and maturity is completely tax-free. For someone in the 30% bracket, the effective pre-tax equivalent yield is 10.14% (7.1% / 0.7) -- unmatched by any other guaranteed instrument.nnKey rules: minimum Rs 500/year, maximum Rs 1.5L/year, up to 12 deposits per year. Interest credited on March 31 each year. Deposit before the 5th of each month to earn that month's interest.nnExtension: after 15 years, extend in 5-year blocks indefinitely with or without fresh contributions.

Formula

Maturity (simplified) = P x [(1+r)^n - 1] / r x (1+r) Where P = annual deposit, r = 7.1%, n = years Rs 1.5L/year for 15 years at 7.1% = approximately Rs 40.68 lakh Rs 1.5L/year for 25 years (extended) = approximately Rs 1.13 Cr

Real-life example

🇮🇳 India example

Sneha deposits Rs 1.5L every year before April 5th from age 25. At 40 (15 years): Rs 40.68L tax-free. She extends for 5 more years with contributions. At 45: approximately Rs 70L tax-free. Further extension without contributions to 55: approximately Rs 1.4 Cr -- all completely tax-free and government-guaranteed.

Frequently asked questions

Can I open PPF in a private bank? ▼
Yes. PPF accounts are available at designated branches of SBI, HDFC, ICICI, Axis, Kotak, and all post offices. All accounts have identical terms regardless of bank -- the rate is set by the government, not the bank.
What is the best time to deposit in PPF? ▼
Deposit before the 5th of each month (especially April 5th for annual depositors). Interest is calculated on minimum balance between 5th and last day of each month. Depositing after the 5th loses that month's interest on the contribution.
Is PPF better than NPS for retirement? ▼
PPF: guaranteed return (7.1%), fully flexible at maturity, no annuity requirement, but lower ceiling. NPS: market-linked (higher potential 10-14% in equity), better tax benefits (80CCD(1B) gives extra Rs 50K deduction), but 40% must buy annuity. Use both: PPF for guaranteed debt portion, NPS for equity growth.