The practical PPF playbook
You already know PPF is a 15-year government scheme with tax-free interest. Skip the brochure — here's what actually matters when you run an account.
When to deposit: the April 5 rule
PPF interest is calculated on the lowest balance between the 5th and the last day of each month, then credited annually on March 31. Translation: if you deposit before April 5, that money earns interest for the full financial year. Deposit on April 6, and you lose a month of interest on that tranche. Over 15 years of ₹1.5L deposits, the difference between "April 5" and "March 31 next year" is roughly ₹50,000–60,000. Set a calendar reminder for April 1 every year and be done with it.
Lump sum vs monthly — does it matter?
If you can afford ₹1.5L in one go before April 5, do that. You get a full year of compounding on the entire amount. If cash flow forces monthly deposits, that's fine too — just always deposit before the 5th of each month so it counts for that month. Don't split into 12 equal pieces if you can avoid it; front-loading wins.
Partial withdrawals — when they unlock
- Years 1–3: Nothing. Money is fully locked.
- Year 3 onwards: Loan facility — borrow up to 25% of the balance from 2 years ago. Repay in 36 months, 1% interest above PPF rate. Useful but rarely worth it.
- Year 7 onwards: Partial withdrawal — once per FY, up to 50% of the balance 4 years ago (or previous year, whichever is lower). This is the first real liquidity window.
- Premature closure: Only for serious illness, higher education of self/dependant, or NRI status. Costs 1% off your interest rate for the entire period — usually not worth it.
What happens after 15 years
The account matures, but you have three options — pick one within a year of maturity:
- Withdraw everything. Full balance, tax-free. Done.
- Extend with contributions (Form H). Account continues in 5-year blocks. You keep depositing up to ₹1.5L/year and keep the 80C benefit. One partial withdrawal per year allowed, no cap.
- Extend without contributions (default if you do nothing). Balance keeps earning 7.1% tax-free. One withdrawal per year of any amount. No new deposits allowed once you've chosen this path — and you can't switch back.
Most people should pick "extend with contributions" if they can keep funding it — the post-15-year corpus compounds spectacularly because of the larger base.
Numbers: what ₹1.5L/year actually builds
At the current 7.1% rate, contributing the full ₹1.5L every year:
- 15 years: ~₹40.7 Lakh maturity (you put in ₹22.5L, earned ₹18.2L tax-free)
- 20 years (one extension): ~₹66.6 Lakh
- 25 years (two extensions): ~₹1.03 Crore — you crossed the crore mark
- 30 years (three extensions): ~₹1.55 Crore
The math (M = P × ((1+r)^n − 1) / r × (1+r)) assumes end-of-year deposits at a constant 7.1%. Real maturity will move with quarterly rate revisions.
The 7.1% rate is not permanent
Government resets the small-savings rates every quarter. PPF has been at 7.1% since Q2 FY 2020-21 — the longest flat stretch in recent history. Historical range: 7.1% to 8.5% in the last decade. The rate at deposit time applies for that quarter's deposits only; previous balances continue to earn at the rate they were credited. Confirm the live rate at nsiindia.gov.in before each deposit cycle.
Family accounts — the legal stacking limit
The ₹1.5L cap is per person, not per family. You can open accounts for your spouse and minor children, but: a parent's contribution to a minor child's PPF still counts toward the parent's ₹1.5L 80C cap. The minor's account just gives the family more tax-free interest space — not more 80C deduction. Spouse's PPF (with their own income) gets their own ₹1.5L deduction.
Quick comparison: PPF vs ELSS vs NPS (for 80C)
- PPF — 7.1% guaranteed tax-free. 15-yr lock-in. Best for the debt portion of your portfolio.
- ELSS — Equity mutual fund. ~12% historical (volatile). 3-yr lock-in. LTCG over ₹1L taxed at 10%. Best for growth.
- NPS — Hybrid debt/equity. 10–12% expected. Lock-in to age 60. Extra ₹50K deduction under 80CCD(1B). 60% lump sum tax-free at maturity, 40% mandatory annuity (taxable). Best for retirement-specific saving.
Practical split for most salaried investors: max PPF for safety + ELSS for growth + NPS only if you want the extra ₹50K deduction.
Frequently Asked Questions
Should I max out the ₹1.5 Lakh in PPF every year?
Depends on what else is filling your 80C. If EPF deductions already eat ₹80–100K of your cap, putting another ₹1.5L into PPF means you're 100% debt for tax-saving — that's conservative for anyone with a 10+ year horizon. A common split: ₹50K–1L in PPF (the safe floor) and the rest in ELSS for equity growth. If you have no equity exposure elsewhere and a 15+ year horizon, you're leaving compounding on the table by going all-PPF.
The April 5 deposit trick — does it really matter?
Yes, more than people realise. PPF interest each month is calculated on the lowest balance between the 5th and the last day. Deposit your ₹1.5L on April 4 and it earns 12 months of interest. Deposit on April 6 and you lose that first month. Compound that "lost month" over 15 years and the gap is roughly ₹50,000–60,000 at 7.1%. Set an annual reminder for April 1 — easiest free money you'll find.
PPF vs ELSS vs NPS — what's the practical pick?
PPF (7.1% tax-free, 15 yr): low-risk, lowest return. Use for the debt portion. ELSS (~12% expected, 3 yr lock): equity, volatile, LTCG over ₹1L taxed at 10%. Use for growth. NPS (10–12%, locked to 60, mandatory 40% annuity at maturity): only worth it if you want the extra ₹50K deduction under 80CCD(1B). Most salaried investors should hold all three — PPF for stability, ELSS for growth, NPS for the extra deduction.
Can I extend PPF after 15 years?
Yes — in 5-year blocks, indefinitely. Decide within a year of maturity: (a) withdraw everything, (b) extend with contributions (Form H — keep depositing up to ₹1.5L, keep 80C benefit), or (c) extend without contributions (default if you do nothing — balance keeps compounding tax-free, one withdrawal per year). If you pick (c), you can't switch back to depositing. Most people should pick (b) if they can fund it.
Can I withdraw before 15 years?
Year 1–6: no withdrawal. Loan facility from year 3 onwards (small amounts, 1% above PPF rate). Year 7 is when partial withdrawal unlocks — once per FY, up to 50% of the balance four years prior. Premature closure (full break) only for serious illness, higher education, or NRI status, and you lose 1% of interest for the entire period. Treat PPF as illiquid for the first 7 years.
Is PPF interest really tax-free in the new regime too?
Yes. PPF interest and maturity are tax-exempt under both Old and New regimes. What you lose in the New regime is the 80C deduction on contributions — that's an Old regime benefit only. So in the New regime, PPF is still a perfectly fine tax-free debt instrument; you just don't get the upfront tax saving on the ₹1.5L deposit.
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