Key Takeaways
- The Public Provident Fund (PPF) interest rate is 7.1% per annum for the April-June 2026 quarter (Q1 FY 2026-27), set quarterly by the Ministry of Finance. The rate has been steady at 7.1% since January 2023.
- PPF is a fully EEE (Exempt-Exempt-Exempt) instrument: your deposits up to Rs 1,50,000 per year qualify for deduction under Section 80C, the interest earned is tax-free, and the maturity amount is tax-free.
- Section 80C deduction is available only under the old tax regime. If you opt for the new tax regime under Section 115BAC, you get zero tax benefit on PPF deposits.
- Lock-in period is 15 years. Partial withdrawal is allowed from the 7th financial year. Loans against the PPF balance are available from the 3rd to 6th financial year.
- Premature closure is permitted only after 5 years, and only for medical emergencies, higher education, or change of residency status. A 1% interest penalty applies.
- NRIs cannot open new PPF accounts. Existing accounts opened as a resident continue until maturity but cannot be extended.
What is the PPF interest rate for 2026? The PPF interest rate for Q1 FY 2026-27 (April-June 2026) is 7.1% per annum, compounded annually. The rate is revised quarterly by the Ministry of Finance, but PPF has stayed at 7.1% since January 2023. Interest is calculated monthly on the minimum balance between the 5th and last day of each month, so depositing before the 5th maximises your return.
The Public Provident Fund is one of the oldest and most widely held long-term savings instruments in India. It combines sovereign backing (zero credit risk), a returns rate that consistently outpaces most bank fixed deposits, and full tax exemption at every stage. For anyone on the old tax regime, PPF is the foundation of their Section 80C portfolio. For employees who contribute to NPS, see our NPS Section 80CCD deduction guide which works alongside PPF under the old regime.
Despite its popularity, most account holders underutilise PPF because they do not understand the interest calculation timing, the partial withdrawal limits, or the extension rules after maturity. This guide covers the complete lifecycle of a PPF account: who can open one, how interest is computed, the exact tax treatment, withdrawal and loan rules, premature closure conditions, NRI implications, and the Section 123 transition under the Income Tax Act 2025.
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What PPF Is and Why It Exists
The Public Provident Fund was established in 1968 under the PPF Act, 1968. It is a long-term savings scheme backed by the Government of India, operated through India Post offices and authorised commercial banks (SBI, Bank of India, Central Bank of India, Bank of Baroda, ICICI Bank, and others).
The design objective is straightforward: give individuals a risk-free, tax-efficient vehicle for retirement and long-term savings. The government sets the interest rate quarterly, and the principal and returns carry a sovereign guarantee.
PPF is not an employer-linked scheme (that is EPF under the Employees' Provident Fund Act, 1952). PPF is a voluntary scheme open to any resident Indian individual, whether salaried, self-employed, or a homemaker.
Who Can Open a PPF Account
| Criterion | Rule |
|---|---|
| Eligibility | Any resident Indian individual (includes salaried, self-employed, homemakers, students) |
| Age limit | No minimum or maximum age |
| Minor child | One parent or legal guardian can open an account in the child's name |
| HUF | Cannot open a PPF account. Only individuals qualify |
| NRI | Cannot open a new account. Existing accounts opened as a resident continue until maturity |
| Joint account | Not allowed. PPF is strictly a single-holder account |
| Multiple accounts | One account per individual. A second account, if discovered, is merged or deactivated |
One common confusion: a parent who opens a PPF account in their own name AND one in their minor child's name has two accounts, but the combined deposit limit across both is capped at Rs 1,50,000 per financial year. You cannot contribute Rs 1.5 lakh to your account and another Rs 1.5 lakh to the child's account.
Where and How to Open a PPF Account
PPF accounts can be opened at:
- Any India Post office that handles savings account work
- Authorised banks including SBI, Bank of India, Bank of Baroda, Central Bank of India, ICICI Bank, Axis Bank, HDFC Bank, and others
Most banks now allow online PPF account opening through net banking or the mobile app. You need:
- A filled PPF account opening form (Form A for post office, bank-specific form for banks)
- KYC documents: Aadhaar, PAN, and a passport-size photograph
- An initial deposit of at least Rs 500
The account is activated within 1-2 working days. You receive a PPF passbook and an account number. The account can be transferred between banks and post offices free of charge.
Deposit Rules: Minimum, Maximum, and Timing
| Parameter | Rule |
|---|---|
| Minimum deposit | Rs 500 per financial year |
| Maximum deposit | Rs 1,50,000 per financial year |
| Deposit frequency | No restriction. Can deposit as lump sum or in up to 12 instalments per year |
| Payment modes | Cash, cheque, demand draft, or online transfer |
| Penalty for no deposit | If you skip the minimum Rs 500 deposit in any year, the account becomes inactive. To reactivate, you pay Rs 500 per defaulted year plus Rs 500 for the current year as a revival fee |
The 5th-of-the-Month Rule
PPF interest is calculated monthly on the minimum balance between the 5th and the last day of the month. This means:
- If you deposit Rs 50,000 on April 3, the full Rs 50,000 earns interest for April
- If you deposit the same Rs 50,000 on April 7, it earns zero interest for April because the balance on April 5 did not include it
For a lump-sum annual investor, the optimal strategy is to deposit the entire Rs 1,50,000 on or before April 5. This ensures interest accrues on the full balance for all 12 months of the financial year.
PPF Interest Rate: Current Rate and Historical Trend
The interest rate for the April-June 2026 quarter (Q1 FY 2026-27) is 7.1% per annum.
The rate is revised quarterly by the Ministry of Finance based on the yield of government securities. However, PPF has stayed at 7.1% since January 2023, making it one of the most stable rates in the small savings family.
Historical PPF Interest Rates
| Period | Rate (% p.a.) |
|---|---|
| April 2020 - March 2021 | 7.1 |
| April 2021 - March 2022 | 7.1 |
| April 2022 - March 2023 | 7.1 |
| April 2023 - March 2024 | 7.1 |
| April 2024 - March 2025 | 7.1 |
| April 2025 - March 2026 | 7.1 |
| April 2026 - June 2026 | 7.1 |
The rate has been flat at 7.1% for over six years. Before 2020, PPF earned between 7.6% and 8.7%. The current rate still comfortably beats most bank savings accounts (3-4%) and is competitive with 5-year bank fixed deposits (6.5-7.5%) after adjusting for tax, since PPF interest is entirely tax-free.
How PPF Interest Is Calculated
PPF interest is compounded annually but calculated monthly. The formula:
Monthly interest = (Minimum balance between 5th and last day of the month) x (Annual rate / 12)
The monthly interest amounts are accumulated through the year and credited to the account on March 31 of each financial year.
Worked example: You deposit Rs 1,50,000 on April 4, 2026 (before the 5th). No other transactions during the year.
- April interest: Rs 1,50,000 x 7.1% / 12 = Rs 887.50
- May to March: same Rs 887.50 each month (balance stays constant)
- Total interest for FY 2026-27: Rs 887.50 x 12 = Rs 10,650
- Balance on March 31, 2027: Rs 1,50,000 + Rs 10,650 = Rs 1,60,650
If the same Rs 1,50,000 was deposited on April 30 instead, April's interest would be zero (the balance on April 5 did not include the deposit), costing you Rs 887.50 for that one month of delay.
PPF Tax Benefits: The EEE Advantage
PPF carries EEE (Exempt-Exempt-Exempt) tax treatment, the most favourable category under Indian income tax law:
| Stage | Tax treatment |
|---|---|
| Contribution | Deductible up to Rs 1,50,000 under Section 80C (old regime only) |
| Interest accrual | Fully exempt from income tax every year. No annual tax on PPF interest |
| Withdrawal / Maturity | Fully exempt from income tax. No tax on partial withdrawals, full maturity, or post-maturity extension withdrawals |
Section 80C Deduction Rules for PPF
- PPF deposits count towards the Rs 1,50,000 combined cap under Section 80CCE, which pools Section 80C, Section 80CCC (pension fund contributions), and Section 80CCD(1) (employee NPS contribution).
- If you already contribute Rs 1,50,000 to EPF through salary deductions, your PPF deposit does not give any additional Section 80C benefit because the cap is already exhausted.
- From Tax Year 2026-27, Section 80C becomes Section 123 read with Schedule XV under the new Income Tax Act 2025. The eligible instruments and the Rs 1.5 lakh limit remain the same.
- Section 80C / Section 123 is not available under the new tax regime (Section 115BAC). If you are on the new regime, PPF gives you zero deduction on deposit, but the interest and maturity remain tax-free regardless of regime. See our old vs new tax regime comparison to evaluate which regime suits your income level.
PPF Tax Benefit in Actual Numbers
For a taxpayer in the 30% slab (old regime), depositing Rs 1,50,000 in PPF:
- Tax saved on deposit: Rs 1,50,000 x 30.8% (including 4% cess) = Rs 46,200
- Tax saved on interest (Rs 10,650): Rs 10,650 x 30.8% = Rs 3,280 (this is the tax you would have paid if the same return came from a taxable FD)
- Effective pre-tax return equivalent: approximately 10.3% for a 30% slab taxpayer
This is why PPF outperforms a 7.5% bank FD on an after-tax basis, even though the nominal rate is lower.
PPF Lock-in, Partial Withdrawal, and Maturity
Lock-in Period: 15 Years
The PPF account matures 15 years from the end of the financial year in which it was opened. An account opened on July 10, 2026 (FY 2026-27) matures on March 31, 2042.
During the lock-in, you cannot withdraw the full balance. However, two liquidity options exist: partial withdrawal and loans.
Partial Withdrawal Rules (From Year 7)
Partial withdrawal is allowed starting from the 7th financial year of account opening. The rules:
| Parameter | Rule |
|---|---|
| Earliest withdrawal | 7th financial year from opening (e.g., opened in FY 2026-27, first withdrawal in FY 2032-33) |
| Maximum amount | Lower of: 50% of balance at end of 4th year preceding the withdrawal year OR 50% of balance at end of the year preceding the withdrawal year |
| Frequency | One withdrawal per financial year |
| Tax on withdrawal | Fully exempt. No tax on partial withdrawals |
| Form | Form C submitted to the bank or post office |
Example: Account opened in FY 2026-27. In FY 2032-33 (7th year), balance at end of FY 2028-29 (4th preceding year) is Rs 5,00,000 and balance at end of FY 2031-32 (preceding year) is Rs 9,00,000. Maximum withdrawal = lower of Rs 2,50,000 or Rs 4,50,000 = Rs 2,50,000.
Loan Against PPF (Years 3 to 6)
Before partial withdrawal becomes available, you can take a loan against your PPF balance from the 3rd to the 6th financial year:
| Parameter | Rule |
|---|---|
| Available period | 3rd to 6th financial year from opening |
| Maximum loan | 25% of the balance at the end of the 2nd financial year preceding the loan year |
| Interest rate | PPF rate + 1% (currently 7.1% + 1% = 8.1%) |
| Repayment | Must be repaid within 36 months. If not, remaining amount is treated as a withdrawal and reduces your balance |
| Second loan | A second loan can be taken only after the first is fully repaid |
The loan facility becomes unavailable from the 7th year because partial withdrawal opens up at that point.
What Happens at Maturity (After 15 Years)
At the end of 15 years, you have three options:
Option 1: Withdraw the Full Balance
Close the account and withdraw everything. The entire amount (principal + accumulated interest) is fully tax-free. Submit Form C to your bank or post office.
Option 2: Extend Without Contributions
Extend the account for a 5-year block without making any new deposits. The existing balance continues to earn interest at the prevailing PPF rate. You can withdraw up to 60% of the balance that existed at the start of the extension block, in instalments (one withdrawal per financial year). Submit Form H within one year of maturity.
Option 3: Extend With Contributions
Extend for a 5-year block and continue depositing up to Rs 1,50,000 per year. The Section 80C deduction continues to apply (old regime). You can withdraw up to 60% of the balance at the start of the block, one withdrawal per financial year. Submit Form H within one year of maturity.
You can continue extending in 5-year blocks indefinitely. Many retirees use this to maintain a tax-free interest income stream.
Important: If you do not submit Form H within one year of maturity, the account is treated as extended without contributions by default. You can still withdraw, but you lose the ability to make fresh deposits for that block.
Premature Closure Rules
Premature closure (closing the account before 15 years) is permitted only after 5 complete financial years from the date of account opening, and only under specific conditions:
| Condition | Required documentation |
|---|---|
| Life-threatening disease of account holder, spouse, dependent children, or parents | Medical reports from a recognised authority |
| Higher education of account holder or dependent children | Confirmed admission letter and fee receipt from a recognised institution |
| Change in residency status (becoming NRI) | Passport and visa documentation showing NRI status |
Penalty: The interest rate applied to the entire tenure is reduced by 1% below the applicable PPF rate. For example, if you earned 7.1% over the years, the effective rate on premature closure becomes 6.1%, and the difference is deducted from your balance.
PPF for NRIs: What You Need to Know
| Scenario | Rule |
|---|---|
| Opening a new account | Not permitted. NRIs cannot open PPF accounts |
| Existing account (opened as resident) | Continues until maturity. Fresh deposits are allowed until maturity |
| Extension after maturity | Not permitted for NRI holders. The account must be closed at maturity |
| Interest rate during NRI tenure | The prevailing PPF rate applies (same as residents) |
| Maturity proceeds | Credited to the NRO account. Repatriation follows RBI rules |
If you became an NRI after opening a PPF account, continue contributing until maturity to maximise the tax-free corpus. But plan for closure at the 15-year mark since extension is not available.
PPF vs Other Section 80C Instruments
| Feature | PPF | ELSS | 5-Year Tax-Saving FD | NSC | EPF |
|---|---|---|---|---|---|
| Returns | 7.1% (govt-set) | Market-linked (12-15% historical avg) | 6.5-7.5% (bank-set) | 7.7% (Q1 FY 2026-27) | 8.25% (FY 2025-26) |
| Lock-in | 15 years | 3 years | 5 years | 5 years | Until retirement/exit |
| Tax on returns | Exempt | LTCG above Rs 1.25 lakh taxed at 12.5% | Taxable at slab rate | Interest taxable at maturity | Exempt (if 5+ years) |
| Risk | Zero (sovereign) | Market risk | Zero (bank guarantee) | Zero (sovereign) | Zero (sovereign) |
| Liquidity | Partial from year 7 | Full after 3 years | Nil before 5 years | Nil before 5 years | Partial (conditions apply) |
PPF is the right choice when your priority is guaranteed, tax-free returns with zero risk. ELSS suits investors with higher risk tolerance who want shorter lock-in and potentially higher returns. For EPF withdrawal rules and tax treatment, see our EPF withdrawal tax guide.
Common PPF Mistakes to Avoid
1. Depositing after the 5th of the month. You lose that month's interest. Set a reminder for April 5 if you invest annually.
2. Exceeding the Rs 1.5 lakh limit. Deposits above Rs 1,50,000 in a financial year earn zero interest and are not eligible for Section 80C deduction. The excess is returned without interest.
3. Opening two accounts. Only one PPF account per individual is allowed. If a second account is discovered (sometimes opened at a different bank), it is deactivated and the deposits returned without interest.
4. Ignoring the minor account limit. Deposits in a minor child's PPF account count towards the parent's Rs 1,50,000 limit. Contributing Rs 1,50,000 to your own account and another Rs 50,000 to the child's account means Rs 50,000 earns no interest.
5. Not submitting Form H within one year of maturity. If you want to extend with contributions, the form must be filed within 12 months of maturity. Missing this window locks you into extension without contributions.
6. Assuming PPF works under the new tax regime. The interest and maturity remain tax-free under both regimes, but the Section 80C deduction on deposits is available only under the old regime. If you are on the new regime, you get no tax benefit on the contribution stage.
The Section 123 Transition (Income Tax Act 2025)
The Income Tax Act 2025 replaces the Income Tax Act 1961 from Tax Year 2026-27 (FY 2026-27). For PPF holders, the practical changes are:
- Section 80C becomes Section 123 read with Schedule XV
- The Rs 1,50,000 combined limit and EEE status remain unchanged
- The pooling of Section 80C + 80CCC + 80CCD(1) under Section 80CCE now falls under a single Section 123 umbrella
- Your ITR form for AY 2027-28 onwards will reference Section 123 instead of Section 80C. The claim process remains identical
No action is required from PPF account holders for this transition. The scheme, the limit, and the tax treatment are preserved.
How to Claim PPF Deduction in Your ITR
- Choose the old tax regime in your ITR form (ITR-1, ITR-2, ITR-3, or ITR-4 depending on your income sources)
- Navigate to Schedule VI-A (Chapter VI-A deductions)
- Enter your PPF deposit amount under Section 80C
- The amount auto-caps at Rs 1,50,000 when combined with other 80C investments (EPF, ELSS, insurance premium, etc.)
- Cross-verify with your PPF passbook or bank statement. The AIS (Annual Information Statement) may show your PPF transactions, but the deposit amount should match your passbook exactly
If you are filing for AY 2026-27 (income earned in FY 2025-26), use Section 80C. If you are filing for AY 2027-28 (income earned in FY 2026-27), use Section 123.
Source attribution: PPF interest rates are published quarterly by the Ministry of Finance, Government of India via the Department of Economic Affairs notification. PPF scheme rules are governed by the Public Provident Fund Act, 1968 and the Public Provident Fund Scheme, 2019. Section 80C provisions are under the Income Tax Act, 1961 (Section 123 under the Income Tax Act, 2025). All rates and rules stated in this guide are current as of June 2026 and subject to revision by the respective authorities.
