What is PPF?
Public Provident Fund (PPF) is a 15-year government-backed savings scheme for Indian residents. Backed by the Government of India, it pays a tax-free interest rate (currently 7.1% annually, reviewed quarterly by the Finance Ministry), with deposits qualifying for Section 80C deduction. Interest is exempt from tax, and the maturity amount is exempt — making PPF one of the few remaining EEE (Exempt-Exempt-Exempt) instruments in the Indian tax code.
For a 30-year-old earning ₹15 L/year in the 30% slab, ₹1.5 L into PPF effectively yields 10.1%-equivalent taxable return — beating most FDs, beating most debt funds, and approaching equity-fund averages on a risk-adjusted basis.
How is PPF interest calculated?
The math is annual compounding on the running balance:
For each year:
balance(y) = (balance(y-1) + yearly_deposit) × (1 + r/100)
where r is the current PPF rate (7.1% in 2025).
CalcMaster iterates this 15 times to compute the maturity amount, and shows you the year-by-year growth so you can see when the curve takes off (usually around year 8–10).
Worked example
You deposit ₹1.5 lakh every year for 15 years at 7.1% PPF rate.
| Year | Cumulative deposit | Balance |
|---|---|---|
| 1 | ₹1.5 L | ₹1.61 L |
| 5 | ₹7.5 L | ₹9.39 L |
| 10 | ₹15.0 L | ₹22.55 L |
| 15 | ₹22.5 L | ₹40.69 L |
Total deposited: ₹22,50,000 (₹1.5 L × 15) Total interest earned: ₹18,19,000 Maturity amount: ₹40,69,000
Interest accounts for ~45% of the maturity amount. Tax-free.
PPF rules you must know
| Rule | Value |
|---|---|
| Minimum yearly deposit | ₹500 |
| Maximum yearly deposit | ₹1,50,000 |
| Tenure | 15 years (extendable in 5-year blocks) |
| Number of accounts | One per person; minors can have via guardian |
| Interest rate | Set quarterly (currently 7.1%) |
| Compounding | Annual |
| Tax treatment | EEE (deposit deductible, interest tax-free, maturity tax-free) |
| Section 80C limit | Counts toward the ₹1.5 L 80C cap |
When to deposit during the year
PPF interest is calculated on the minimum balance between the 5th and the end of the month. This has a sneaky implication:
- Depositing on or before the 5th: full month's interest counts
- Depositing on the 6th or later: that month's interest is lost on the new deposit
For ₹1.5 lakh deposited annually:
| Strategy | Cumulative interest over 15 years |
|---|---|
| Lump sum on April 1 (start of FY) | ₹18.19 L |
| Lump sum on March 31 (end of FY) | ₹17.30 L (~₹90k less) |
| Monthly on 5th of each month | ₹17.78 L |
| Monthly on 6th of each month | ₹17.34 L |
Optimal strategy: deposit ₹1.5 L lump-sum on 1 April each year. Loses minimum interest, maximizes compounding time. If you split monthly, do it on or before the 5th.
Partial withdrawal and loans
| Feature | When available |
|---|---|
| Loan against PPF | Years 3–6 (cheap; useful as a backup credit line) |
| Partial withdrawal | Year 7+ (max 50% of balance at end of year 4) |
| Premature closure | Year 5+ (with 1% interest penalty; only for medical/education) |
| Full closure | Year 15 (maturity) |
The 15-year lock-in is real. PPF is not liquid. Treat it as deeply retirement-locked money.
Components and inputs explained
Yearly deposit
₹500 minimum, ₹1.5 L maximum. CalcMaster caps your input at ₹1.5 L automatically — even if you type more, the calculation uses ₹1.5 L (matching real PPF rules).
Interest rate
Defaults to the current 7.1% but you can change it — useful for projecting under different rate scenarios. Historical rate range: 7.1%–12% (1990s peak).
Tenure
Fixed at 15 years for the maturity calculation. After 15 years you can extend in 5-year blocks (with or without further deposits) — CalcMaster doesn't model extensions yet.
PPF vs alternatives
| Instrument | Rate | Tax treatment | Lock-in | Liquidity |
|---|---|---|---|---|
| PPF | 7.1% | EEE | 15 yr | Low |
| FD (5-yr tax saver) | 6.5–7.5% | Interest taxable; principal 80C eligible | 5 yr | None |
| ELSS mutual fund | 11–14% expected | LTCG 12.5% above ₹1.25 L | 3 yr | Medium |
| NPS Tier-1 | 9–12% expected | Mixed (lumpsum tax-free, annuity taxable) | Till 60 | Very low |
| EPF (auto-deduction) | 8.15% | EEE for ≥ 5 yr service | Till retirement | None |
| SSY (for girl child) | 8.2% | EEE | 21 yr | None |
For a 30-year-old in the 30% slab, the tax-adjusted ranking for the safe-allocation bucket is roughly: PPF > EPF > SSY > tax-saver FD > regular FD.
Extending PPF after 15 years
At maturity you have three options:
- Withdraw fully — tax-free maturity, principal + interest in your bank
- Extend without contribution — money keeps earning interest, no further deposits required
- Extend with contribution — submit Form H within 1 year; continue ₹1.5 L/yr deposits
Many Indian retirees extend PPF in option 3 (or 2) purely to avoid the taxable alternatives. A 60-year-old retiree's PPF extension can compound for another 10–20 years at tax-free 7%, beating most taxable retirement options on after-tax basis.
Considerations
- PPF is the "safe" allocation, not the growth driver. Pair with equity SIPs for the growth bucket.
- Don't double up on 80C. PPF + ELSS + EPF + life insurance + home loan principal collectively cap at ₹1.5 L deduction. Track total.
- Interest rate is reviewed quarterly. It's been 7.1% since 2020. Long-term direction is downward as RBI's policy rates fell.
- PPF is per-person, not per-account. You can't open multiple PPF accounts; consolidate older accounts.
- NRIs can't open new PPF accounts, but existing accounts can be continued till maturity (no extension).
Limitations
- The calculator assumes constant interest rate over 15 years. Real PPF rates vary quarterly — for retrospective accuracy, blend historical rates.
- It doesn't model the minimum-balance-between-5th-and-month-end rule precisely. Assumes annual deposit on April 1.
- It doesn't model partial withdrawals during years 7–15.
- It doesn't model account extensions beyond 15 years.
Related calculators
- EPF Calculator — automatic deduction from salary
- NPS Calculator — market-linked retirement
- SSY — Sukanya Samriddhi for daughters
- Section 80C — overall tax-saver tracker
- ELSS — equity tax saver (alternative)
- FD Calculator — comparison with FDs
Final note. PPF is the most-recommended Indian retirement instrument for a reason: high tax-adjusted return, sovereign guarantee, no NAV volatility, and 30+ years of compounding if you start at 25 and extend at 40 and 55. Set up the ₹1.5 L April-1 deposit on auto-debit, forget about it, and let it compound until you're 60. This calculator just shows you the number that's coming.