The Public Provident Fund (PPF)
secure (Backed entirely by the Central Government), popular, and tax-efficient long-term savings schemes
Interest Rate: The interest rate is 7.1% per annum (compounded annually).
Deposit Limits: You must deposit a minimum of 500 Rs. up to a maximum of 1.5 lakh per financial year.
Tenure & Extension: mandatory 15-year lock-in period. Upon maturity, you can extend the account indefinitely in blocks of 5 years at a time, with or without continuing fresh deposits.
The EEE Tax Advantage
PPF stands out due to its Exempt-Exempt-Exempt (EEE) tax status under the Income Tax Act:
Exempt: Deposits are eligible for tax deductions under Section 80C (up to ₹1.5 lakh annually).
Exempt: The interest accumulated annually is completely exempt from tax.
Exempt: The entire maturity corpus is 100% tax-free at the time of withdrawal.
Liquidity: Loans and Withdrawals
While it is a long-term product, PPF offers liquidity options during emergencies:
Feature Timeline Limit / Conditions
Loan Facility Between the 3rd and 6th financial years. Up to 25% of the balance held at the end of the second preceding year.
Partial Withdrawal Permitted from the 7th financial year onwards. Max 50% of the balance at the end of the 4th preceding year or the preceding year, whichever is lower.
Premature Closure Allowed only after 5 financial years. Permitted under strict conditions (e.g., life-threatening medical treatment or higher education) subject to a 1% interest penalty.
Essential Investor Rules
Eligibility: Only resident Indian individuals can open an account. Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not eligible to open new accounts.
One Account Rule: You can open only one PPF account in your name across the entire country (either at a bank or a post office). You can, however, open an additional account as a guardian for a minor child.
Asset Protection: A unique advantage of PPF is that the balance cannot be attached by any court decree or order to pay off debts or liabilities.
Pro-Tip: PPF interest is calculated on the lowest balance between the 5th day and the end of the calendar month. To maximize your compounded returns, always make your monthly deposits before the 5th of the month.