What the PPF is
The Public Provident Fund is a government-backed savings scheme with a fifteen-year term. You may deposit between ₹500 and ₹1.5 lakh in a financial year, interest is credited annually at a rate the government reviews every quarter, and the balance is backed by the Government of India rather than by a bank.
Its defining feature is the tax treatment. PPF is EEE — exempt at all three stages:
- Deposits qualify for a deduction under section 80C, up to ₹1.5 lakh a year
- The interest credited each year is not taxed
- The maturity amount is not taxed
Very few instruments in India are exempt at all three points, and that is what makes the PPF's headline rate worth more than it looks. At the 30% slab, a 7.1% tax-free return is equivalent to roughly 10.2% from a taxable fixed deposit.
How the interest is actually calculated
The detail that costs people money: interest is calculated on the lowest balance between the 5th and the last day of each month.
A deposit made on the 6th earns nothing for that entire month. Deposit on or before the 5th and the month counts. Over fifteen years, a habit of depositing late can cost a meaningful amount.
The same logic applies annually. The ₹1.5 lakh deposited in April earns interest for the full year; the same amount deposited in March earns almost none for that year. If you can fund the whole deposit early in the financial year, do it before the 5th of April.
This calculator assumes a single deposit at the start of each year, which is the arrangement that maximises interest.
The formula
With one deposit at the start of each year and interest compounded annually:
M = Σ P × (1 + r)^(n − k + 1)
Each year's deposit P compounds for the number of years remaining. The first deposit earns for all fifteen years, the last for one.
At ₹1.5 lakh a year and 7.1%, the fifteen-year maturity comes to roughly ₹40.68 lakh, of which ₹22.5 lakh is your own money and the rest is interest. Interest is more than 44% of the final balance, entirely tax free.
Extension, withdrawal and loans
At fifteen years you can withdraw the whole balance, or extend in blocks of five years. An extension can be made with or without further contributions, and a balance left to compound in an extended account continues to earn at the prevailing rate.
Partial withdrawal is allowed from the seventh year, capped at 50% of the balance at the end of the fourth preceding year.
A loan against the balance is available between the third and sixth years, at a small margin over the PPF rate.
Premature closure is permitted only in specific circumstances — serious illness, higher education, change of residency status — and carries an interest penalty.
How to use this calculator
- Enter the yearly investment. The maximum is ₹1.5 lakh in a financial year, across all PPF accounts in your name.
- Set the time period. Fifteen years is the base term; extend in blocks of five to model a longer hold.
- The rate of interest is shown at the current figure and is not editable, because the government sets it rather than you. Each page states the date the rate was checked.
Where the PPF fits
It is a long-duration, low-volatility, tax-free instrument backed by the sovereign. It is not a growth asset and it is not liquid. For most people it works best as the stable portion of a long-term portfolio — the part that does not move when equity does — rather than as the whole of it.
The fifteen-year term is the real cost. Money placed in a PPF is committed for a long time, and the quarterly rate reset means you do not even know what it will earn across that term.