5 Things You Should Know Before Investing in a PPF Account

If you talk to anyone about their financial goals, you will realise how different they are from yours. Every individual has different financial conditions, which directly affect their financial goals, risk appetite, and time horizon. However, one thing stays common in all portfolios: a portion of the invested capital is in fixed-income instruments or schemes to offer steady income and offset the negative effect of high-risk-high-reward instruments such as stocks. Investments in fixed-income instruments allow earnings from regular interest rates, which stabilises the overall portfolio and can help build a retirement corpus. One of the most popular fixed-income investment instruments is the Public Provident Fund (PPF), which is backed by the Indian government, making it one of the safest investment schemes.

If you are looking to earn a steady income by investing in a Public Provident Fund (PPF), or if you are a salaried employee who contributes regularly to PPF, it is important to know some basic things about PPF. This blog will help you know some things to consider before investing in PPF.

• PPF is a long-term savings scheme backed by the Indian government that offers tax-free returns.
• The current interest rate for PPF is 7.1%.
• At every stage of the PPF account, the investment, interest earned, and maturity amount are all exempt from tax.

Public Provident Fund (PPF) is a scheme governed and backed by the Indian government that allows individuals to earn steady income over time. It is designed as a long-term retirement scheme and provides regular compound income on the PPF balance. Individuals can open a PPF account and make regular contributions to it to ensure they multiply the amount through the interest payouts. PPF has a maturity period of 15 years, which can be extended in blocks of 5 years after maturity. The minimum deposit amount is Rs. 500, and the maximum amount is Rs. 1.5 lakh per year. The interest rate is determined by the government and revised quarterly. The current rate (as of 2025) is around 7.1% per annum.

Opening a PPF account helps individuals earn regular income through interest payments, which are always timely. One of the most important benefits of opening a PPF account is the tax benefits it provides. You can claim the contribution amount as a tax deduction under section 80C of the Income Tax Act, up to Rs. 1.5 lakh.

Here are some features of a PPF account:

• Tenure: 15 years with the option to extend in 5-year blocks.
• Interest rate: Currently 7.1% but revised quarterly.
• Tax benefits: Tax deduction up to Rs. 1.5 lakh.
• Investment amount: Rs. 500 minimum and Rs. 1.5 lakh maximum per financial year.
• Loan facility: Available from the 3rd to 6th financial year.
  
   

5 essential things to know before investing in a PPF account

Tax benefits of PPF
PPF offers attractive tax advantages. Contributions made to your PPF account qualify for deductions of up to Rs. 1.5 lakh in a financial year, helping reduce your overall taxable income under Section 80C.

Withdrawal rules
A full withdrawal from your PPF account is permitted only after completing the mandatory 15-year lock-in period. Partial withdrawals, however, are allowed from the 5th financial year onward. You can withdraw up to 50% of the balance available at the end of the 4th year preceding the year of withdrawal.

Loan facility on PPF balance
PPF also allows you to borrow against your account balance between the 3rd and 6th financial years. The maximum loan amount is 25% of the balance recorded two years before the year you apply for the loan.

A Secure Investment Choice

A PPF account is a government-backed scheme, making it a highly reliable and risk-free investment. The government decides and pays the interest, ensuring safety and stability for all account holders.

Assured Returns with Variable Rates

While returns on PPF are guaranteed, the interest rate isn’t fixed. It is revised quarterly by the government. Over the years, rates have gradually reduced—from around 12% historically to more modest levels. For example, the rate was 7.1% in Q3 of FY 2020–21.

Your PPF Account Can Become Inactive

To keep your PPF active, you must deposit at least Rs. 500 each year. The maximum allowable contribution is Rs. 1.5 lakh annually. If you skip the minimum deposit, your account becomes inactive. You can reactivate it by submitting a written request and paying a Rs. 50 penalty for each year of inactivity.

Boosting Your PPF Returns

To maximise returns, invest the full yearly amount of Rs. 1.5 lakh at the start of the financial year. Since interest is calculated from April to March, depositing before April 5 ensures the entire amount earns interest for the full year, helping you grow your savings more efficiently.

You can open a PPF account both online and offline. To open a PPF account online, you can visit the PPF portal and fill out the PPF form. You can visit the nearest designated bank or post office to fill out a physical PPF opening form to open a PPF account offline.

You will need to fill out Form C, which you can get from the designated banks or post offices or online. Once filled out, submit the form with the relevant documents, and after successful verification, the PPF account will be credited to your bank account.

PPF is an ideal savings scheme that can allow you to build wealth over time and ensure financial security. Now that you know everything about PPF, you can consider investing in the scheme online or offline.

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