Understanding the Public Provident Fund (PPF): Features, Tax Benefits, and Investment Guide

The Public Provident Fund (PPF) stands as a secure investment choice, offering reduced risk for individuals aiming to build a retirement fund. This scheme provides consistent returns, currently set at 7.1% annually. Furthermore, contributions to a PPF account qualify for tax deductions of up to INR 1.5 lakh under Section 80C, thereby lowering an individual's tax obligations. It is an ideal option for those seeking a dependable investment to reduce tax liability and secure assured returns.

Key Highlights

Interest Rate: 7.1% per annum (Financial Year 2025–26).
Investment Limits: A minimum of ₹500 and a maximum of ₹1.5 lakh can be invested annually by both employed and self-employed individuals.
Risk-Free & Tax Benefits: Contributions up to ₹1.5 lakh per year are exempt from tax, and both the interest earned and the maturity amount are completely tax-free.
Loans & Withdrawals: Loans are available after one year, up to 25% of the account balance. Partial withdrawals can be made after five years, and the full amount can be withdrawn after 15 years.

What is a PPF Account?

The Public Provident Fund (PPF) is a widely recognized long-term savings initiative that delivers appealing interest rates and significant tax advantages. The interest generated from PPF investments is entirely tax-exempt, establishing it as an efficient mechanism for wealth accumulation without tax concerns.

As of July 27th, 2025, PPF accounts can be opened using Aadhaar-based biometric eKYC authentication. This paperless system also facilitates deposits and withdrawals. The PPF interest rate for the second quarter (July-September) of FY 2025-26 remains constant at 7.1% per annum.

Public Provident Fund Interest Rate 2025

Rate (FY 2025–26): 7.1% per annum, compounded annually.
Credited on: March 31st each year.
Calculation: Interest is determined based on the lowest balance recorded between the 5th and the last day of every month.

Importance of PPF

The PPF is widely regarded as an excellent investment choice, particularly for individuals who prefer to avoid high-risk ventures. While the returns may not be exceptionally high, as they are market-dependent, the scheme offers remarkable stability. Additionally, PPF investments contribute to portfolio diversification and provide valuable tax benefits.

Features of the PPF Scheme

Individuals interested in investing in a PPF account can begin with a minimum deposit of INR 500. However, the maximum permissible annual investment is INR 1.5 lakh. The table below outlines essential details regarding the PPF scheme:

Eligibility

The scheme is open to individuals (adults, or guardians opening on behalf of minors).
Each individual is permitted to hold only one PPF account, excluding accounts opened for minors.

Account Opening

A minimum balance of ₹100 is required to open an account.
Nomination facilities are available at the time of opening or can be added later.
Joint accounts are not permitted; only individual accounts can be opened.
Parents or legal guardians are authorized to open a PPF account for a minor.

Tenure and Extension

The scheme has a tenure and lock-in period of 15 years.
Upon maturity, the account can be extended in blocks of 5 years (with or without further contributions) or closed.

Contributions

The minimum annual contribution is ₹500.
The maximum annual contribution is ₹1.5 lakh.
Contributions can be made at least once a year, either as a lump sum or in up to 12 installments.
To reactivate an inactive account, a penalty of ₹50 plus a minimum deposit of ₹500 is required.

Risk

The PPF is a government-backed scheme, making it a very safe investment option. It is well-suited for investors with a low-risk tolerance.

Loan Against PPF

Loans can be availed after the first year of account opening.
The maximum loan amount is 25% of the available balance.
A second loan can only be taken after the first loan has been fully repaid.
The interest rate is 1% if the loan is repaid within 36 months; otherwise, it increases to 6%.

Withdrawals

Full withdrawals are permitted after the completion of 15 years.
Partial withdrawals can be made after 5 years, up to a maximum of 50% of the balance recorded at the end of the 4th year preceding the withdrawal, or at the end of the year before the withdrawal, whichever is lower.
Premature closure is allowed only under specific conditions, such as serious illness or for higher education expenses.

Tax Benefits of Public Provident Fund

Beyond serving as a low-risk investment and aiding in retirement planning, the Public Provident Fund also offers substantial tax benefits, helping to reduce an individual's tax burden.

Deduction on Contribution - Section 80C

Contributions made to a Public Provident Fund account are eligible for deduction under Section 80C of the Income Tax Act.
A maximum deduction of INR 1.5 lakh can be claimed, but only if the individual opts for the old tax regime.
This deduction for PPF contributions is not available under the new tax regime.

Taxability of Interest on PPF

Interest earned on PPF contributions up to INR 5 lakh per annum is exempt from tax.
Interest accrued on PPF deposits made on or before April 1st, 2021, is entirely tax-exempt.

How to Open a PPF Account?

A PPF account can be opened at any Post Office or through nationalized banks such as State Bank of India or Punjab National Bank. Currently, several private banks, including ICICI, HDFC, and Axis Bank, are also authorized to provide this facility.

To open an account, the following documents are typically required:

A completed account opening application form.
KYC documents, such as Aadhaar, Voter ID, or Driving License.
Proof of residential address.
A nominee declaration form.
A passport-size photograph.

Process to Open a PPF Account Online

Step 1: Access your bank account via internet banking or the mobile banking application. Step 2: Select the option to 'Open a PPF Account'. Step 3: Choose 'Self Account' if you are opening it for yourself, or 'Minor Account' if it is for a minor. Step 4: Fill in all the necessary details in the application form. Step 5: Specify the total amount you intend to deposit in the account for the current financial year. Step 6: Submit the application. An OTP will be sent to your registered mobile number; enter it in the designated field. Step 7: Your PPF account will be created instantly. The new PPF account number will be displayed on the screen, and a confirmation email with all details will be sent to your registered email address.

Process to Open a PPF Account in a Post Office

Step 1: Obtain an application form either from your nearest post office or download it online. Step 2: Complete the form and submit it along with the required KYC documents and a passport-size photograph. Step 3: Make the initial deposit necessary to open the post office PPF account. The amount can range from INR 500 to INR 1.5 lakh per financial year. Step 4: Once your application has been processed, you will receive a passbook for your newly opened PPF account.

PPF Withdrawal Rules

If you wish to make a partial or complete withdrawal from your PPF account balance, follow these steps:

Step 1: Obtain the PPF withdrawal application form (Form 3/Form C) from the bank or post office where your account is held. Step 2: Complete the application form with all pertinent information. Step 3: Submit the filled application to the relevant branch of the bank or post office where your PPF account is located.

PPF Withdrawal Form

Individuals are required to submit Form 3/Form C for any PPF amount withdrawal. This form is divided into three primary sections:

Section 1 (Declaration): In this part, you must state your PPF account number and the exact amount you wish to withdraw. You also need to specify the number of years that have elapsed since the account's inception.
Section 2 (Office Use): This section is for official purposes and includes details such as the account opening date, the total balance, the date of any previously approved withdrawals, the maximum withdrawal amount permissible, and the sanctioned withdrawal amount. It also requires the date and signature of the authorized officer, typically the service manager.
Section 3 (Bank Details): This section requests the banking information where the funds should be directly credited, or the details of the bank in whose favor a cheque or demand draft is to be issued. It is mandatory to attach a copy of your PPF passbook with this application.

How to Close a PPF Account?

According to PPF regulations, the full balance can only be withdrawn after the account reaches its 15-year maturity period.
It is not possible to withdraw the entire account balance before completing the full tenure under any circumstances.
However, premature withdrawal of up to 50% of the account balance is permitted after five years, but only under specific special circumstances.

The process for closing a PPF account after its tenure at a post office is as follows:

Step 1: Fill out Form C with the necessary information and attach your PPF passbook. Step 2: Submit these documents to the appropriate Post Office or bank branch where your account is maintained. Step 3: Your application will be processed, and the account will be closed. The payment will be transferred to your savings account linked to the PPF account.

How to Transfer a PPF Account?

You have the option to transfer your PPF account to a different branch of the same bank or post office, or to switch it between a bank and a post office. It is important to note that there is currently no online facility for transferring PPF accounts. The offline procedure is outlined below:

Step 1: Visit the bank or post office branch where your PPF account is currently held. Step 2: Request the application form for PPF account transfer and complete it with the relevant details. Step 3: The branch representative will process your application and forward it, along with all necessary documents and payment, to the new branch. Step 4: Once the new branch receives your application and supporting documents, you will need to submit a new PPF account opening application, accompanied by your old PPF account's passbook. At this stage, you may also choose to change your nominee. Step 5: After this application is processed, your PPF account will be successfully transferred to the new branch.

Which Banks Provide PPF Account Services?

You can open a PPF account at your nearest post office branch or at a participating bank branch, depending on your convenience. The banks listed below are authorized to offer PPF account services.

How to Link Aadhaar with a PPF Account Online?

Step 1: Log in to your internet banking account. Step 2: Locate and click on the 'Registration of Aadhaar Number in Internet Banking' option. Step 3: Enter your 12-digit Aadhaar number in the designated field and click 'Confirm'. Step 4: Select your PPF account to link it with the Aadhaar number. Step 5: To verify the completion of the Aadhaar linking request, click on the 'Inquiry' option on the homepage.

How to Activate an Inactive PPF Account?

To reactivate a dormant PPF account, follow these steps:

Step 1: Submit a written application to your bank or post office branch, formally requesting the reactivation of your account. Step 2: Pay the minimum required amount of INR 500 for each financial year during which no contributions were made, in addition to a penalty of INR 50 for each inactive year. Step 3: The bank or post office will then process your request and reactivate your account.

Conclusion

PPF accounts offer steady returns, making them particularly suitable for investors who prefer lower risk and are planning for retirement. While they provide attractive interest rates, tax benefits, and various other advantages, it is important to consider their long tenure and comparatively lower returns compared to medium and high-risk investment funds before deciding to open a PPF account.