PPF — Frequently Asked Questions
What is PPF and how does it work?+
Public Provident Fund (PPF) is a government-backed long-term savings scheme in India with a 15-year lock-in period. You can deposit between ₹500 and ₹1.5 lakhs per year. The interest rate (currently 7.1% p.a.) is set by the government quarterly. PPF enjoys EEE (Exempt-Exempt-Exempt) tax status: deposits are tax-deductible under Section 80C, interest is tax-free, and the maturity amount is completely tax-free.
What is the best time to deposit in PPF each year?+
Deposit before the 5th of April every year to earn interest for the full year. PPF interest is calculated on the minimum balance between the 5th and the last day of each month. Depositing on April 1st–4th maximises your annual interest. Depositing after April 5th means you lose one month of interest on that amount. This timing tip alone can add thousands to your final corpus over 15+ years.
Can I withdraw from PPF before 15 years?+
Partial withdrawals from PPF are allowed from the 7th year onwards — up to 50% of the balance at the end of the 4th year or the immediately preceding year, whichever is lower. Full premature closure is allowed only after 5 years in specific cases (medical emergency, higher education). Premature closure before 5 years is not permitted. Loans against PPF balance are available from the 3rd to 6th year at low interest rates.
Can I extend my PPF account after 15 years?+
Yes. After the 15-year maturity, you can extend PPF in blocks of 5 years, indefinitely. You can extend with continued contributions (same ₹1.5 lakh annual limit applies) or without contributions (balance continues to earn interest). Extensions must be requested within 1 year of maturity. Many long-term investors use PPF for 20–30 years, and the compounding over this extended period produces outstanding tax-free returns.
Is PPF better than FD or SIP?+
PPF, FD, and SIP serve different purposes. PPF (7.1% tax-free) is best for conservative, long-term, tax-efficient savings — its effective post-tax yield is equivalent to a taxable FD at ~10%. FDs offer liquidity but returns are fully taxable. Equity SIP (12–15% expected) offers the highest long-term returns but with market risk. For most investors, PPF should be part of a balanced portfolio: max out PPF first for the tax benefit, then invest additional savings in SIP for higher growth.