PPF Guide 2026-27 — Interest Rate, Rules & Maturity Calculation
PPF (Public Provident Fund) remains India’s most trusted long-term savings instrument — backed by the Government of India, offering guaranteed returns, complete tax exemption, and protection from creditors. Over 15 years, a disciplined PPF investor depositing the maximum ₹1.5 lakh annually can build a tax-free corpus exceeding ₹40 lakh. Yet many investors misunderstand the lock-in rules, withdrawal conditions, and the optimal deposit timing that maximises interest.
This guide covers the current PPF interest rate, the complete rule book, maturity calculations with worked examples, tax benefits under Section 80C, withdrawal and loan facilities, and the extension strategy after 15 years. Use CalcDesk’s free PPF Calculator to project your exact maturity value.
What is PPF and Who Can Open an Account
PPF is a government-backed long-term savings scheme established under the Public Provident Fund Act, administered through post offices and most major banks (SBI, HDFC, ICICI, etc.). Key eligibility rules:
- Any resident Indian individual can open a PPF account
- Only one PPF account per person (except a minor’s account opened by a guardian)
- NRIs cannot open new PPF accounts, but existing accounts can run till maturity (no extension allowed)
- HUFs cannot open PPF accounts
- Parents/guardians can open accounts for minors, subject to the combined ₹1.5 lakh limit across self and minor accounts
Current PPF Interest Rate FY 2026-27
PPF Interest Rate
Set quarterly by Ministry of Finance
Interest calculated monthly on lowest balance between
the 5th and last day of the month
Credited to account annually on 31 March
📌 Deposit before the 5th for maximum interest: Since interest is calculated on the lowest balance between the 5th and end of each month, depositing on the 1st-4th of the month earns interest for that entire month. Depositing on the 6th onwards means you lose that month’s interest on the new deposit.
PPF Deposit Rules
| Rule | Detail |
|---|---|
| Minimum annual deposit | ₹500 |
| Maximum annual deposit | ₹1,50,000 |
| Number of deposits allowed | Maximum 12 per financial year |
| Deposit modes | Cash, cheque, DD, online transfer (net banking) |
| Lock-in period | 15 years from account opening |
| Account opening | Post office or authorised bank branches |
Worked Example 1 — Maximum Annual Investment for 15 Years
₹1,50,000/year deposited at start of year, 7.1% interest
Annual deposit: ₹1,50,000 | Tenure: 15 years | Rate: 7.1%
Total invested: ₹1,50,000 × 15 = ₹22,50,000
Maturity Value: ≈ ₹40,68,000
Total interest earned: ≈ ₹18,18,000
All of this — contribution and interest — is completely tax-free under EEE status
Worked Example 2 — ₹5,000/Month PPF for 15 Years
Smaller monthly deposits, common for middle-income savers
Monthly deposit: ₹5,000 (₹60,000/year) | Tenure: 15 years | Rate: 7.1%
Total invested: ₹60,000 × 15 = ₹9,00,000
Maturity Value: ≈ ₹16,27,000
Total interest earned: ≈ ₹7,27,000
Worked Example 3 — PPF with 5-Year Extension (20 Years Total)
Continuing contributions after initial 15-year maturity
₹1,50,000/year for 20 years (15 original + 5-year extension) at 7.1%
Total invested: ₹30,00,000
Maturity Value: ≈ ₹66,58,000
Total interest: ≈ ₹36,58,000 — note how the extension years (16-20) contribute disproportionately more interest due to the larger compounding base
Section 80C Tax Benefit on PPF
PPF contributions qualify for deduction under Section 80C of the Income Tax Act 1961, up to ₹1.5 lakh per year. This is part of the overall ₹1.5 lakh 80C umbrella shared with EPF, ELSS, life insurance premium, principal repayment on home loan, and other eligible investments.
⚠️ Only available under Old Tax Regime: If you opt for the New Tax Regime for FY 2026-27, you cannot claim the 80C deduction for PPF contributions. The PPF investment itself remains valid and the interest/maturity stays tax-free regardless of regime — only the upfront deduction is regime-dependent.
EEE Status — Why PPF is Uniquely Tax-Efficient
| Stage | Tax Treatment | Detail |
|---|---|---|
| Exempt (Investment) | ✅ Deduction under 80C | Up to ₹1.5L/year (Old Regime only) |
| Exempt (Accrual) | ✅ Interest tax-free | No annual tax on interest earned |
| Exempt (Withdrawal) | ✅ Maturity tax-free | Entire maturity amount, including interest, is tax-free |
This EEE status is rare in Indian taxation — most instruments are only EET (Exempt-Exempt-Taxed) where withdrawal is taxed. NPS, for example, taxes part of the withdrawal. PPF, EPF, and Sukanya Samriddhi Yojana are among the few true EEE instruments. Compare with the PPF vs NPS vs ELSS comparison for a complete tax-efficiency analysis.
Partial Withdrawal Rules
From the 7th financial year of account opening, you can make one partial withdrawal per year. The maximum withdrawal amount is the lower of:
- 50% of the balance at the end of the 4th year preceding the year of withdrawal, OR
- 50% of the balance at the end of the immediately preceding year
Loan Against PPF
Between the 3rd and 6th financial year, you can take a loan against your PPF balance instead of withdrawing. Loan amount: up to 25% of the balance at the end of the 2nd year preceding the loan application year. Interest on the loan is 1% per annum above the PPF interest rate, repayable within 36 months.
What Happens After 15 Years — Your Three Options
| Option | What It Means | Best For |
|---|---|---|
| 1. Withdraw and close | Take full maturity amount, close account | If you need the funds or have better alternatives |
| 2. Extend without contribution | Balance continues earning interest; one withdrawal/year allowed | If you don’t need to add more but want continued tax-free growth |
| 3. Extend with contribution | File Form H within 1 year of maturity; continue depositing up to ₹1.5L/year | If still working and want to keep building tax-free corpus |
💡 Tip: Extension can be done in blocks of 5 years repeatedly — there’s no limit to how many times you extend. Many retirees use PPF extension (without contribution) as a tax-free emergency fund, since one withdrawal per year is permitted with no tax implications.
PPF vs FD vs ELSS — Quick Comparison
| Feature | PPF | Bank FD | ELSS |
|---|---|---|---|
| Current Return | 7.1% | 6.5-7.5% | 12-14% (market-linked) |
| Lock-in | 15 years | As chosen (no lock-in for regular FD) | 3 years |
| Tax on returns | Tax-free (EEE) | Taxable as per slab | LTCG 12.5% above ₹1.25L |
| Risk | Zero (govt backed) | Low (DICGC insured to ₹5L) | Market risk |
| 80C benefit | Yes (Old Regime) | Only 5-yr tax-saver FD | Yes (Old Regime) |
🏦 Calculate Your PPF Maturity Value — Free
Enter your annual deposit and tenure. See your exact maturity amount and total interest earned.
→ Open PPF CalculatorPPF Interest Calculation — The Crucial 5th Day Rule
PPF interest is calculated monthly but credited annually (on 31 March). The critical rule: interest for each month is computed on the lowest balance between the 5th and last day of that month. This single rule determines whether your deposit earns interest for the current month or only from the next month onwards.
PPF Monthly Interest Formula
Worked Example — ₹1.5L deposit timing, existing balance ₹5L
Scenario A: Deposit on April 3rd
Balance from 5th to 30th April: ₹5,00,000 + ₹1,50,000 = ₹6,50,000
April interest: ₹6,50,000 × 7.1% ÷ 12 = ₹3,854
Scenario B: Deposit on April 7th
Balance from 5th to 6th April: ₹5,00,000 (deposit not yet made)
Lowest balance for April (5th to last day): ₹5,00,000
April interest: ₹5,00,000 × 7.1% ÷ 12 = ₹2,958
Loss from depositing 4 days late: ₹896 in April alone
Over 15 years, consistently depositing after the 5th costs approximately ₹1,000–₹1,500 in lost interest annually — equivalent to ₹15,000–₹22,500 over the full PPF tenure.
💡 Best practice: Set a standing instruction or auto-debit from your salary account to transfer your PPF deposit on the 1st or 2nd of each month. Even if your salary credits on the 1st, the PPF transfer on the same day counts for that month. For lump-sum annual deposits, always complete the transfer by April 4th to earn interest from April itself — do not wait for tax season reminders in December or March.
PPF for Minors — Opening and Managing on a Child’s Behalf
Opening a PPF account for a minor child is one of the most powerful long-term wealth-building strategies available to Indian parents. A child born today can have a PPF account opened immediately, giving a 15-year runway that matures when the child is a teenager — perfectly timed for college expenses or early career support.
Who can open: A parent or legal guardian can open a PPF account on behalf of a minor child. Both parents cannot separately open accounts for the same child — only one guardian account per minor. The account is in the child’s name, operated by the guardian until the child turns 18.
Age requirement: There is no minimum age — an account can be opened at birth with a birth certificate as the primary KYC document. The 15-year maturity period runs from the date of account opening, not from when the child turns 18.
📌 Combined contribution limit: The ₹1.5 lakh per year PPF limit is a combined ceiling covering your own PPF account AND any minor’s PPF account you manage. If you contribute ₹1,00,000 to your own PPF, you can contribute at most ₹50,000 to your child’s PPF in the same financial year. Exceeding ₹1.5L total earns no interest on the excess and is returned without interest.
Strategy — PPF for Child’s College Fund
Account opened: At birth (Year 0)
Annual contribution: ₹75,000/year for 15 years
Total invested: ₹11,25,000
Corpus at maturity (15 years, 7.1% rate): ≈ ₹19,50,000
Child’s age at maturity: 15 years — available for college or extended for 5-year block
Tax treatment: PPF interest is exempt (EEE). Minor’s interest clubs with higher-earning parent — but since PPF interest is exempt, clubbing has zero additional tax impact.
After child turns 18: Minor-to-major conversion at bank/post office; child takes full control of the account.