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

Public Provident Fund (PPF) is a safe investment vehicle with lower risk that enables one to accumulate a retirement corpus through a steady return of 7.1% per annum. An investment in PPF also makes taxpayers eligible to claim tax deductions up to Rs. 1.5 lakh under Section 80C thus reducing tax liability. Anyone looking for a safe investment option to save taxes and earn guaranteed returns should open a PPF account.

Q2 FY 2025-26 Interest Rate Update

The PPF interest rate for Q2 (July-September) of FY 2025-26 remains the same at 7.1% p.a. 

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 is 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 Scheme Key Highlights

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

Eligibility

• Individuals (adults or on behalf of minors).
• Only one PPF account per person (excluding minors).

Account Opening

• Minimum opening balance: ₹100.
• Nomination is allowed at the time of opening or later.
• Joint accounts are not allowed. Only individual accounts are permitted.
• Parents or guardians can open a PPF account on behalf of a minor.

Tenure and Extension

• 15 years (both tenure and lock-in period).
• Post maturity: Extend in 5-year blocks (with/without contributions) or close the account.

Contributions

• Minimum: ₹500/year.
• Maximum: ₹1.5 lakh/year.
• Frequency: At least once/year; up to 12 installments or lump sum.
• Inactive Account Reactivation: ₹50 penalty + ₹500 deposit.

Risk

• Government-backed, safe investment. Suitable for risk-averse investors.

Loan Against PPF

• Available after 1 year of opening.
• Max Loan: 25% of available balance.
• Second loan only after first is fully repaid.
• Interest: 1% if repaid within 36 months; 6% if not.

Withdrawals

• Full: After 15 years.
• Partial: After 5 years; max 50% of balance at end of 4th year or year before withdrawal.
• Premature Closure: Allowed for serious illness or higher education.

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

Public Provident Fund Interest Rate

• Rate (FY 2025–26): 7.1% p.a. (compounded annually).
• Credited on: 31st March annually.
• Calculation: Based on lowest balance between 5th and last day of each month.

Tax Benefits of Public Provident Fund

Apart from being a low-risk investment option and assist in retirement planning, this fund also results in tax benefits, thus reducing your tax burden as well. Find out how!

Deduction on Contribution - Section 80C 

• Contribution to Public Provident Fund can be claimed as a deduction under section 80C of the Income Tax Act.
• A maximum deduction of Rs. 1.5 lakhs can be claimed, but only under the old regime.
• Deduction for contribution to Public Provident Fund is not available under the new tax regime.

Taxability of Interest on PPF

• Interest on PPF is exempt for contributions made up to Rs. 5 lakh per annum.
• Whereas, interest accruing on PPF deposited on or before 1st April, 2021, is fully exempt.

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 nationalized 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.

PPF Withdrawal Rules

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.  

How 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

How to Transfer 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. Please note that there is no online facility to transfer funds in PPF so far. Here is the offline procedure that needs to be followed.

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.

Conclusion 

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

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