PPF(Public Provident Fund) - Interest Rate 2025-26, Tax Benefits, Withdrawal & Account Opening

The purpose of the Public Provident Fund (PPF), which was first implemented in India in 1968, was to mobilise small contributions for investment and return. It can also be referred to as an investment vehicle that enables one to accumulate retirement funds while reducing yearly taxes. Anyone looking for a safe investment option to save taxes and earn guaranteed returns should open a PPF account.

What is PPF Account?

Public Provident Fund (PPF) scheme is a long-term investment option that offers an attractive rate of interest and returns on the amount invested. The interest earned and the returns are not taxable under Income Tax. One has to open a PPF account under this scheme and the amount deposited during a year will be claimed under section 80C deductions.

PPF Key Information

Any person wanting to invest in PPF can start with a minimum investment of Rs. 500. However, the maximum amount that one can invest is Rs. 1.5 per year. The following table provides some of the key information regarding PPF: 

Features of PPF account

Below are the essential features of PPF

Eligibility

• Who Can Open?
  
  • Any Indian citizen.
  • Adults for themselves or on behalf of minors.
• One Account Rule: One PPF account per individual (excluding accounts for minors).
• Not Eligible:
  
  • NRIs and HUFs (cannot open new accounts).
  • However, existing accounts of NRIs/HUFs will continue till maturity but cannot be extended.

Opening Account

• Opening balance of Rs 100 is mandatory.
• Nomination: Can be done at the time of account opening or at a later point of time.
• Joint accounts not allowed. Only individual accounts are permitted.

Account Tenure and Lock-in

• Tenure: 15 years.
• Lock-in Period: 15 years (same as tenure).
• Post-Maturity Options:
  
  • Can be extended in blocks of 5 years (with or without contributions). (or)
  • The account can be closed, and the balance can be withdrawn.

Contribution Rules

• Minimum Deposit: ₹500 per financial year.
• Maximum Deposit: ₹1.5 lakh per financial year.
• Deposit Frequency: At least deposit of once a year is required for the first 15 years. It can be made in lump sum or multiple instalments (up to 12 installments).
• Active Account Requirement: A Deposit of at least ₹500 every year is mandatory to keep the account active.
• Inactive Account Reactivation: Reactivation requires a ₹50 penalty + ₹500 deposit.

Interest Rate and Calculation

• Interest Rate (FY 2025–26): 7.1% per annum (compounded annually).
• Interest Payment: Credited on 31st March every financial year.
• Interest Calculation Basis: Interest is calculated on the lowest balance between the close of the 5th day and the last day of the month.

Tip: To earn interest for a month, deposit your contribution on or before the 5th of that month.

Risk Factor

• PPF is a Government-backed investment, offering stable investment without any risk.
• It is therefore suitable for risk averse investors expecting guaranteed returns

Tax Benefits

• Tax Deduction: Deposits are eligible under Section 80C of the Income Tax Act.
• Exempt-Exempt-Exempt (EEE) Status: Contributions, interest earned, and maturity amount are all tax-free.

Loan Against PPF

• Available from: After completion of a year from the date of the initial deposit.
• Maximum Limit: The loan amount can be a maximum of 25% of the total available amount.
• Second Loan: A second loan can be taken only after the first loan is repaid fully.
• Interest: 
  • Loans repaid within 36 months -1% per annum from the date of loan disbursement.
  • Loans not repaid within 36 months - of 6% per annum from the date of loan disbursement.

Withdrawal 

• Complete Withdrawal: Can be done at the end of 15th year.
• Partial Withdrawals: 
  • Permitted after completion of 5th year. 
  • Up to a maximum of 50% of the amount that is in the account at the end of the 4th year can be withdrawn prematurely.
  • Frequency:  Can be made only once in a financial year.
• Premature Closure: Allowed in specific circumstances (e.g., serious illness, higher education).

PPF calculator can be used to estimate the maturity amount and interest earned based on your contributions.

How Important is PPF?

The PPF (Public Provident Fund) is considered an excellent investment option, especially for people uncomfortable with taking risks. While the returns may not be very high because they depend on the market, they offer stability. Additionally, investing in PPF can help diversify your portfolio and has tax benefits.

How to Open a PPF Account?

A PPF account can be opened with either a Post Office or with any nationalised bank like the State Bank of India or Punjab National Bank, etc. These days, even certain private banks like ICICI, HDFC and Axis Bank among others are authorized to provide this facility.

You need to submit the below-mentioned documents:

• Duly filled account opening application form
• KYC documents such as Aadhaar, Voters ID, Driving license, etc.
• Residential address proof
• Nominee declaration form
• Passport size photograph

Process to Open a PPF Account Online

Step 1: Log into your bank account on the internet banking or mobile banking platform.

Step 2: Select the ‘Open a PPF Account’ option.

Step 3: If the account is for self, click on the ‘Self Account’ option. If you are opening the account on behalf of a minor, select the ‘Minor Account’ option.

Step 4: Enter the relevant details in the application form.

Step 5: Key in the total amount you want to deposit in the account per financial year.

Step 6: Submit the application. An OTP will be sent to the registered mobile number. Enter it in the relevant field.

Step 7: Your PPF account will get created in an instant! Your PPF account number will be displayed on the screen. An email will be sent to your registered email address with all the details confirming the same.

Process to Open a PPF Account in a Post Office

Step 1: Get an application form from your nearest post office or online.

Step 2: Fill up the form and submit it with the required KYC documents and a passport-size photograph.

Step 3: Make the initial deposit required to open a post office PPF account. The amount can range from Rs.500 up to Rs.1.5 lakh per financial year.

Step 4: Once your application is processed, a passbook will be given to you for the PPF account opened.

Procedure for Withdrawal from PPF

In case you wish to partially or completely withdraw the balance lying in your PPF account.

Step 1: Get the application for withdrawal of PPF from the bank or post office where you opened the PPF account (Form 3/Form C).

Step 2: Fill in the application form with relevant information.

Step 3: Submit the application to the concerned branch of the bank or post office where your PPF account lies. 

PPF Withdrawal Form

An individual must file Form 3/Form C for the withdrawal of the PPF amount. This form has 3 sections:

Section 1: Declaration section where you must give your PPF account number and the amount of money you propose to withdraw. Along with that, you also need to mention how many years have actually passed since the account was first opened. 

Section 2: Office use section which comprises details like:

• Date when the PPF account was opened
• Total balance standing in the PPF account
• Date on which the previously requested withdrawal was allowed
• Total withdrawal amount available in the account.
• The amount of money sanctioned for withdrawal.
• Date and signature of the person in charge – usually the service manager.

Section 3: The bank details section asks for the details of the bank where the money is to be credited directly or the bank in whose favour the cheque or the demand draft is to be issued. It is also mandatory to enclose a copy of the PPF passbook along with this application.  

Process to Close a PPF account

• As per the rules governing PPF accounts, you can fully withdraw your PPF account balance only after the account completes its tenure of 15 years. 
• Before completing the full tenure, you cannot withdraw the entire account balance under any circumstances. 
• However, premature withdrawal of up to 50% of the account balance is allowed after completing 5 years. This is permitted under special circumstances only.

The procedure to close a PPF account after completion of its tenure in the post office is given below:

Step 1: Fill up the relevant information in Form C and attach your PPF passbook.

Step 2: Submit this to the relevant Post Office/bank branch where the account is held.

Step 3: Your application will be processed and the account will be closed. You will receive the payment in your savings account linked to the PPF account

Process of Transfer of a PPF account

You can transfer your PPF account to another branch of the bank/post office, switch from bank to post office or switch from post office to a bank. Here is the procedure.

Step 1: Visit the bank or post office branch where your PPF account is held.

Step 2: Request the application form to transfer the PPF account and fill it up with the relevant details.

Step 3: The branch representative will process your application and send it with the necessary documents and payment to the new branch.

Step 4: Once the new branch receives your application and supporting documents, you have to submit a new PPF account opening application along with the old PPF account’s passbook. You may change the nominee at this point.

Step 5: Once this application is processed, your PPF account is successfully transferred to the new branch.

Which Banks Provide PPF Account Services?

You can open a PPF account either at the post office branch nearest to you or at a participating bank branch based on your convenience. The participating banks that offer a PPF account are given below.

How to Link Aadhaar with a PPF Account Online?

Step 1: Log on to your internet banking account.

Step 2: Click on the ‘Registration of Aadhaar Number in Internet Banking’ option.

Step 3: Enter your 12-digit Aadhaar number therein and click on ‘Confirm’.

Step 4: Select the PPF account to link it to the Aadhaar number and done.

Step 5: Click on the ‘Inquiry’ option on the homepage to check if the Aadhaar linking request is completed.

How to Activate an Inactive PPF Account?

In order to reactivate an inactive PPF account, you can follow the steps below:

Step 1: Submit a written letter to the bank or post office branch requesting to reactivate it.

Step 2: Pay a minimum amount of Rs.500 for each year you have not made any contributions along with the penalty of Rs.50 per inactive year.

Step 3: The bank or PO will process your request and reactivate the account.

Public Provident Fund (PPF) Limitations

PPF accounts do have certain drawbacks that should be considered:

Lock-in Period

• PPF has a lock-in period of 15 years, which is longer than other tax-saving investments like Equity Linked Saving Scheme (ELSS) with a lock-in period of just three years. 
• As discussed earlier, premature withdrawals are allowed in PPF, but there are restrictions and regulations on when and how much you can withdraw. 

Moderate Interest Rate

• The interest rate offered is not very high, considering it is a long-term investment scheme. 
• In contrast, ELSS has the potential to provide double-digit returns to investors.

No Joint Holding 

• PPF accounts cannot be held jointly, even if you intend to open a joint account with your spouse or other family members.

Investment Limit

• The maximum amount that can be invested in a PPF account in a year is ₹1.5 lakh. 
• However, there is no limit to the amount you can invest in other tax-saving instruments like ELSS funds, NPS, or FDs, although the maximum tax benefit that can be claimed remains the same at ₹1.5 lacks under Section 80C.

NRI Restrictions

• While resident Indians can open new PPF accounts, this option is unavailable for NRIs. 
• If you had a PPF account as a resident Indian and have become an NRI, you can continue making deposits into the account, but you cannot open new PPF accounts.

Annual Contribution Requirement

• Failing to contribute the minimum annual contribution amount can lead to the account becoming inactive, and reactivating it requires paying a penalty.

Considering these drawbacks, it is important to carefully evaluate your financial goals and circumstances before investing in a PPF account.

Bank Wise PPF Calculators

Conclusion 

If you prefer low-risk investments and value the security provided by government-backed instruments, PPF can be a suitable choice. 

For further reading, check out these articles:
UIDAI
Income Tax Guide
ITR Filing Due Dates 
SIP   
ELSS   
UAN
Public Provident Fund Calculator
NPS vs PPF
PF vs PPF
ELSS vs PPF
VPF vs PPF