The Public Provident Fund is the grand old instrument of Indian household saving: government-backed, tax-free at every stage, and paying 7.1 per cent in 2026 — a combination no bank deposit can match. For all its age, the PPF remains the default long-term debt allocation for crores of risk-averse savers, from first-job SIP supplements to retirement cores. Its rules on deposits, interest computation and withdrawals reward those who understand them and quietly penalise those who do not.

Deposits: the rules that matter

Any Indian resident adult can open a PPF account at a post office or designated bank, with one account per person — holding more than one in your name violates the scheme. Deposits range from 500 to 1.5 lakh rupees per financial year, in lump sums or up to 12 instalments; the 1.5 lakh ceiling is shared across all your 80C instruments. The financial year’s deposit deadline is April 5 for maximum interest (explained below), though deposits are accepted through March 31. A parent can open an account for a minor child, with the combined family deposits still capped per account. NRIs cannot open new PPF accounts, though existing ones may run to maturity without extension.

How interest is calculated — and the April 5 trick

Interest is computed on the lowest balance between the 5th and the end of each month, credited annually on March 31. The implication is precise: deposit before April 5 and the money earns interest for the full month of April; deposit on April 6 and you lose a month’s interest on the entire amount — at 7.1 per cent on 1.5 lakhs, that is nearly 900 rupees lost to a day’s delay. The rate itself is set quarterly by the government and has held at 7.1 per cent for an extended stretch, though it can change — the rate prevailing each quarter applies to the whole balance. Interest compounds annually, and the 15-year tenure means compounding does the heavy lifting: 1.5 lakhs a year at 7.1 per cent grows to roughly 40 lakhs in 15 years.

Tenure, extension and withdrawals

The account matures in 15 years, extendable indefinitely in 5-year blocks — with or without fresh deposits — which is how PPF becomes a lifelong tax-free compounding machine. Premature closure is allowed only from the 6th year for specified grounds like medical treatment or higher education, with a 1 per cent interest penalty. Partial withdrawals are permitted from the 7th year, limited to one per year and capped at 50 per cent of the balance at the end of the 4th preceding year. Loans against the balance are available from the 3rd to 6th years, up to 25 per cent of the balance two years prior, at 1 per cent above the PPF rate — a little-known liquidity window for the early years.

• Rate: 7.1% in 2026, set quarterly, compounded annually.
• Deposit by April 5: interest counts from the 5th — a day’s delay costs a month’s interest.
• Tenure: 15 years, extendable in 5-year blocks indefinitely.
• Access: loans from year 3–6, partial withdrawals from year 7, premature closure from year 6 (restricted).
• Tax: EEE — deduction on deposit, tax-free interest, tax-free maturity (old regime).

Where PPF fits in 2026

PPF’s role is the safe, tax-free, long-duration core of a portfolio: the debt allocation for retirement, the children’s education fund, the emergency-plus reserve for the conservative. It will not beat equity over 15 years, and it should not try — its job is certainty. Pair it with equity SIPs for growth: the classic 30-year-old’s combination is PPF for the floor and equity funds for the ceiling. One caution: the EEE tax status and 80C deduction apply under the old regime; new-regime taxpayers still get tax-free interest and maturity but no deduction on deposits, which slightly dims — but does not extinguish — its appeal.

FAQs

Can I deposit more than 1.5 lakhs in a year? The account accepts it, but the excess earns no interest and gets no deduction — stick to the ceiling.

Is PPF interest really tax-free? Yes — completely exempt, and maturity proceeds are tax-free too, under current law.

What happens at maturity if I do nothing? The account continues earning interest without fresh deposits until you act — but formally extending in 5-year blocks keeps your options clean.

The PPF rewards patience, punctuality and the discipline of April 5. Fifteen years of tax-free compounding at government-guaranteed rates remains one of the finest deals in Indian personal finance — boring, beautiful and built to last.

Compiled by the Khabar 24h Editorial Desk from publicly available sources.