PPF (Public Provident Fund) is India's most popular government-backed savings scheme — and for good reason. It offers guaranteed returns, complete tax exemption on all three stages (investment, interest, maturity), and government backing. At 7.1% tax-free, it's effectively delivering ~10.1% pre-tax equivalent returns for someone in the 30% bracket.
PPF Interest Rate 2026: 7.1% per Annum
The PPF interest rate is reviewed quarterly by the Ministry of Finance. The current rate of 7.1% per annum has been stable since April 2020. Interest is calculated on the minimum balance between the 5th and last day of each month. This critical rule means you must deposit before the 5th of every month to earn interest for that month.
PPF EEE Tax Status — What It Means
PPF has EEE (Exempt-Exempt-Exempt) tax treatment — the gold standard of tax efficiency in India:
- E1 (Exempt on investment): PPF contributions qualify for Section 80C deduction up to ₹1.5 lakh/year
- E2 (Exempt on interest): Annual interest earned in PPF is completely tax-free — not even added to your income
- E3 (Exempt on maturity): The entire maturity amount (principal + accumulated interest) is 100% tax-free
Compare this to bank FDs where interest is fully taxable, or even NPS where 40% of corpus must buy a taxable annuity. PPF's tax treatment is genuinely unmatched in India for a guaranteed-return instrument.
PPF Contribution Rules
| Parameter | Details |
|---|---|
| Minimum annual contribution | ₹500 per year |
| Maximum annual contribution | ₹1,50,000 per year |
| Deposit frequency | Maximum 12 installments per year |
| Account tenure | 15 years (extendable in 5-year blocks) |
| Interest rate | 7.1% p.a. compounded annually (Q1 2026) |
| Account holders | Individual only (one account per person) |
PPF Extension Beyond 15 Years
After the initial 15-year lock-in, you have two options:
- Extension with contributions: Continue depositing up to ₹1.5L/year and earn interest. Apply within 1 year of maturity. Each extension block is 5 years.
- Extension without contributions: Let the existing balance earn 7.1% interest without adding more money. No application needed — it auto-continues.
During each 5-year extension with contributions, you can make one partial withdrawal of up to 60% of the balance at the start of that extension.
PPF Loan and Partial Withdrawal
- Loan: Available from 3rd to 6th year. Up to 25% of balance at end of 2nd preceding year. Interest rate: PPF rate + 1% (currently 8.1%)
- Partial withdrawal: Available from 7th year. Up to 50% of balance at end of 4th preceding year or preceding year (lower of two). One withdrawal per year.
- Premature closure: Only for medical treatment or higher education. Allowed after 5 years with 1% interest rate penalty.
PPF vs FD vs ELSS Mutual Funds
| Instrument | Returns | Tax | Risk | Lock-in |
|---|---|---|---|---|
| PPF | 7.1% guaranteed | EEE (fully tax-free) | Zero | 15 years |
| Bank FD | 7–7.5% | Interest fully taxable | Zero | 5 years (tax-saver) |
| ELSS Mutual Funds | 12–15% (historical) | LTCG at 10% above ₹1L | High | 3 years |
| NSC | 7.7% | Interest taxable, 80C on reinvestment | Zero | 5 years |
PPF's effective pre-tax equivalent return at 30% bracket = 7.1% ÷ (1−0.30) = 10.14%. This beats most FDs and even some debt mutual funds on a post-tax basis. For risk-averse investors, PPF is hard to beat.
How to Open PPF Account
You can open a PPF account at any nationalized bank (SBI, PNB, Bank of Baroda) or Post Office. Most banks now offer online PPF account opening via net banking or mobile app. Required documents: Aadhaar, PAN, passport photo. Minimum opening deposit: ₹500. Use our PPF Calculator to see your exact maturity amount with year-by-year interest breakdown.