Everything You Need To Know About PPF
If your parents or grandparents have had the “how to manage your money well” talk with you yet, chances are that the Public Provident Fund (PPF) was right at the top of their list. With good reason too – it’s been around since 1968, quietly building wealth for generations of Indians.
At the outset, in 2025, the world looks very different. Everyone’s chasing stocks, SIPs, even crypto. But guess what? PPF still deserves a spot in your portfolio. Why? Because it’s backed by the government, completely risk-free, and gives you solid tax-free returns while maintaining for you the discipline of long-term investment.
How can you make the most of your PPF investments? Is PPF better than NPS, FDs, or even equity mutual funds? If you’ve been wondering, you’re in the right place. Let’s break it down – clearly and simply.
Quick PPF Facts You Should Know
- Interest rate: In the last 7 years, rates have generally ranged between 7.1% and 8% with the current rate being 7.10%
- Tenure: 15 years (can extend in 5-year blocks)
- Min deposit: ₹500/year
- Max deposit: ₹1.5 lakh/year
- Tax benefit: Triple win (EEE – exempt at investment, growth, and maturity)
- Risk: Zero, government-backed
If you’ve only parked money in FDs so far, think of PPF as your safer, tax-free upgrade. Explore FD vs PPF.
Why PPF Still Matters in 2025
- 01 It’s Your Long-Term Backup Plan
Markets crash, inflation rises, interest rates fluctuate—but PPF just keeps compounding quietly in the background.
- 02 Triple Tax-Free Advantage
Every rupee you put in gets tax relief under Section 80C. The interest is tax-free. And maturity is also tax-free. Not many investments can promise that in 2025.
- 03 Good option for Risk-Averse Investors
Markets crash, inflation rises, interest rates fluctuate—but PPF just keeps compounding quietly in the background.
Already maxed out your NPS or ELSS? Add PPF for guaranteed balance.
The Lock-In Truth (and Why It’s Not Bad At All)
Yes, the lock-in is 15 years — longer than most investments. But here’s the thing:
- You can make partial withdrawals from year 7.
- Need quick cash before that? You can take a loan against PPF between year 3 and 6.
- At maturity, instead of withdrawing, you can extend in 5-year blocks and keep earning.
Pro tip: Always deposit your yearly contribution before 5th
April—that way, you get a full year’s interest on the entire amount.
PPF vs FD vs NPS – Which One Wins?
Already maxed out your NPS or ELSS? Add PPF for guaranteed balance.
How Much Can You Actually Build with PPF?
Let’s do a simple calculation.
- If you invest ₹1.5 lakh per year at 7.1% for 15 years → you’ll get around ₹40 lakh (tax-free).
- That’s money growing quietly without market stress.
Imagine pairing this with NPS (market-linked) or life insurance— you’d have both guaranteed safety + growth potential.
Downsides (Because Nothing’s Perfect)
Let’s be real—PPF isn’t flawless. Nothing is.
- Liquidity issue: Money is mostly locked in for 15 years.
- Return vs inflation: While safe, it may not always beat rising costs.
- Investment cap: You can’t invest more than ₹1.5 lakh annually.
So PPF shouldn’t be your only savings tool. But as part of a diversified plan? It’s gold.
How to Open a PPF Account (Step-by-Step)
You can open it at:
- Banks (SBI, HDFC, ICICI, Axis, etc.)
- Post Offices
Documents you need: PAN, Aadhaar, a passport-sized photo, and at least ₹500 to start.
Offline process (Bank/Post Office):
- Visit your bank branch or post office.
- Fill out Form A (PPF account opening form).
- Submit KYC documents (PAN, Aadhaar, photo).
- Make the initial deposit (₹500–₹1.5 lakh).
- Get your PPF passbook with account details.
Online process (through net banking):
- Log into your bank’s net banking portal.
- Look for the option “Open a PPF Account” under services/investments.
- Select whether it’s for self or minor child.
- Enter nominee details and deposit amount.
- Verify with OTP → account is activated instantly.
- Your PPF account details will be available under your savings account login.
Already have a savings account?
Most banks now allow a 5-minute PPF opening fully online, with automatic debits for yearly contributions.
Withdrawal Process – Step by Step
With PPF, you can’t just pull out your money whenever you want—but the rules are actually quite clear and friendly if you plan ahead.
Here’s how the withdrawal process works:
- Partial Withdrawals: Allowed from the 7th financial year onwards. You can withdraw up to 50% of your balance from the 4th year or the preceding year, whichever is lower.
- Loan Option (Years 3–6): Before year 7, instead of withdrawal, you can take a loan against your balance—quick cash without breaking your investment.
- Full Withdrawal at Maturity: At the end of 15 years, you can withdraw the entire accumulated balance, tax-free.
- Extension After Maturity: Don’t want to withdraw yet? You can extend in 5-year blocks, either continuing deposits or simply letting the balance earn interest.
How to withdraw:
- 01. Fill up Form C (available at your bank/post office).
- 02. Submit it along with your PPF passbook.
- 03. For partial withdrawals, specify the amount. For maturity withdrawals, your bank/post office will transfer the full maturity amount to your linked account.
Fees and Charges
The best part about PPF? There are virtually no hidden charges. But there are a few small penalties to be aware of:
- 01 Missed Deposit Penalty:
If you skip a year, your account becomes inactive. To reactivate, you need to pay ₹50 per missed year plus the minimum annual deposit of ₹500.
- 02 Premature Closure:
Allowed only after 5 years, and only for specific reasons (serious illness, higher education, or change in residency status). You’ll have to sacrifice 1% of the interest earned as penalty.
- 03 Loan Against PPF:
Interest is charged at 1% higher than the prevailing PPF rate—still far cheaper than personal loans.
Frequently Asked Questions
In most cases, yes. PPF returns are tax-free, whereas FD returns are taxable. For short-term goals, FD may still work better.
Partial withdrawals are allowed from year 7. Between years 3–6, you can take a loan against your PPF balance.
100%. It’s government-backed with sovereign guarantee.
Absolutely. If you want guaranteed, tax-efficient savings with zero risk, PPF remains one of the best options.
NRIs cannot open a new PPF account. If you already had one before becoming an NRI, you can continue it till maturity but cannot extend it.
No. Only one PPF account per individual is allowed. However, you can open one in your minor child’s name.
Your account becomes inactive. You can reactivate it by paying a penalty of ₹50 per missed year, plus the minimum annual contribution of ₹500.
₹1.5 lakh per financial year. Deposits beyond this limit will not earn interest or tax benefits.
Interest is calculated monthly on the lowest balance between the 5th and last day of the month, and credited annually. That’s why it’s smart to deposit before 5th April.
Yes. You can extend in blocks of 5 years—either with fresh contributions or without them (just letting the balance earn interest).
Yes. From the 3rd to the 6th financial year, you can borrow up to 25% of your balance at a low interest rate.
Yes, most major banks (SBI, HDFC, ICICI, Axis, etc.) allow you to open and manage PPF online through internet banking.
Not always. PPF is best seen as a safe, fixed-return foundation for your portfolio. Pair it with market-linked products (like mutual funds) for inflation-beating growth.
