The Public Provident Fund, commonly called PPF, is one of the safest ways for Indians to save money for the long term. This government-backed investment plan is popular in India because it offers guaranteed returns and tax benefits under section 80C of the Income Tax Act, 1961 if opted for old tax regime to pay taxes.
Many beginners start their investment journey with PPF because it is simple, government-backed, and gives tax benefits.
This guide explains in easy words what PPF is, why people trust it, and how it works in everyday Indian life. By the end, you will clearly understand whether PPF suits your savings goals.
What is a Public Provident Fund (PPF)?
PPF is a long-term savings scheme started by the Government of India. The main idea was to help ordinary people build a habit of regular saving, especially those who do not have any company provident fund.
In simple terms, a PPF account is like a 15-year savings box where you deposit small amounts every year and earn fixed interest decided by the government. You can open this account in a post office or in banks such as SBI, HDFC, ICICI, or Axis Bank.
One person can have only one PPF account in their own name.
Parents can also open another account for a minor child.
NRIs and HUFs cannot open new PPF accounts.
In practice, many first-time earners open PPF as their very first tax-saving investment because it feels familiar like a bank account.
Why Do So Many Indians Choose PPF?
PPF has remained popular for decades because it gives peace of mind more than excitement.
- Full government safety: Your money is protected by the Government of India.
- Tax-free interest: Whatever interest you earn is not taxed.
- Section 80C benefit: Deposits up to ₹1.5 lakh in a year reduce your taxable income if you have opted to pay taxes under the old tax regime.
- Stable returns: Interest rate is reviewed every quarter by the government.
For most beginners, these features remove the fear of losing money. That is why many families treat PPF as the base of their savings, just like a strong foundation of a house.
Key Features of PPF Account in simple words
Here are some important things you need to know about PPF accounts:
- Minimum deposit: ₹500 in a year
- Maximum deposit: ₹1,50,000 in a year
- Account period: 15 years
- Deposits allowed: Up to 12 times in one year
- Interest rate: Declared quarterly by the government of India
- Loan option: From 3rd to 6th year
- Partial withdrawal: From 7th year on-wards
- Tax benefit: Deposit, interest, and maturity all tax-free
These rules make PPF disciplined but not too strict. It pushes you to save regularly without putting heavy pressure.
How Does a PPF Account Work?
Once you open a PPF account, you can contribute money either in a lump sum or through monthly deposits.
The minimum amount you can deposit is ₹500, and the maximum is ₹1.5 lakh in one financial year.
The interest is calculated on your account balance at the end of each year, and this interest is added to your account, making it grow.
However, you cannot withdraw your money completely before the 15-year lock-in period ends. After 6 years, you can start withdrawing part of your balance for certain financial needs.
Let’s see a simple example.
If a person deposits ₹10,000 every year for 15 years and the interest remains around 7.1%, the account can grow to roughly ₹2.75 lakh at maturity.
Now think of someone who deposits the full ₹1,50,000 every year. After 15 years, the amount can cross ₹40 lakh, and the entire money will be tax-free.
Many beginners notice that PPF grows slowly in the early years and faster later. This is the magic of compound interest — interest earning more interest over time.
Steps to Open a PPF Account
You can open a PPF account either online or offline at selected banks and post offices.
To open a PPF account online:
- Visit the website of your chosen bank. You should have an account with that bank.
- Fill out the PPF account opening form with your details (name, address, nominee).
- Upload documents like your Aadhaar card, PAN card, and address proof.
- Make your first deposit of at least ₹500 using online payment methods like internet banking.
To open a PPF account offline:
- Visit a bank or post office that offers PPF accounts.
- Fill out the required form.
- Submit your Aadhaar card, PAN card, and address proof.
- Make your initial deposit of ₹500.
PPF vs Other Investment Options
While PPF is a great option for safe, long-term savings, there are other popular investment options you can consider.
Here’s how PPF compares to other choices:
| Feature | PPF | Fixed Deposit (FD) | National Savings Certificate (NSC) | Equity-Linked Savings Scheme (ELSS) |
|---|---|---|---|---|
| Interest Rate | 7.1% | 6.75% | 6.8% | 8-12% |
| Lock-in Period | 15 years | 5 years | 5 years | 3 years |
| Tax Benefits | Tax-free | Taxable | Taxable | Taxable |
| Risk | Low | Low | Low | High |
Please note that interest rates fluctuate based on government policies and other factors. It is advisable to check the current rates with your bank or post office.
As you can see, PPF offers low risk and guaranteed returns, which makes it a good option for conservative investors. If you are willing to take on more risk for higher returns, you might consider Equity-Linked Savings Schemes (ELSS), which offer the potential for higher returns but come with more risk.
Why You Should Invest in a PPF Account
Here are some great reasons why a PPF account might be a good choice for you:
- Tax Benefits: You can claim a tax deduction on your contributions up to ₹1.5 lakh per year under Section 80C. Plus, both the interest earned and the maturity amount are tax-free.
- Guaranteed Returns: With 7.1% interest (backed by the government), your money will grow steadily over time, without the worry of market fluctuations.
- Long-Term Investment: Since the account has a 15-year lock-in period, it’s perfect for long-term goals like saving for retirement or education.
- Flexibility: You can make partial withdrawals after 6 years if needed. Plus, you can take loans after 3 years of investing.
- Low Risk: Being government-backed, PPF is one of the safest investment options available.
Loan and Withdrawal Rules – Explained Simply
PPF is mainly for long-term saving, so money is not fully free before 15 years. Still, some flexibility is given.
Loan facility
Between the 3rd and 6th financial year, you can take a loan against your PPF balance. This helps during emergencies without breaking the account.
Partial withdrawal
From the 7th year, you can withdraw once every year. The amount allowed is up to 50% of the balance as per rules.
Extension after 15 years
When 15 years are over, you can continue the account in blocks of 5 years, with deposits or even without new deposits. Many people extend it to build a retirement fund.
This often confuses beginners at first, but the idea is simple — PPF is for long goals, not for quick spending.
What Happens When Your PPF Account Matures?
When your PPF account matures after 15 years, you have two options:
- Close the Account: You can withdraw the entire balance, including the interest you’ve earned.
- Extend the Account: You can extend your account in blocks of 5 years to continue earning interest. You can also keep contributing to the account after the 15-year period.
Can You Close a PPF Account Early?
While the general rule is that you cannot close your PPF account before 15 years, there are some exceptions. You may be able to close the account early if you face a medical emergency or need the money to pay for your child’s higher education.
You’ll need to provide supporting documents, such as medical certificates or university admission letters, to qualify for early closure.
Tax Benefits of PPF
PPF enjoys what is called EEE status. In everyday language it means:
- Investment is tax-free – deposits reduce your taxable income under Section 80C.
- Interest is tax-free – you don’t pay any tax on yearly interest.
- Maturity is tax-free – the final amount in your hand is fully yours.
Very few investments in India give all three benefits together. That is why salaried people, small shop owners, and freelancers all like PPF.
Conclusion
PPF is not a get-rich-quick plan. It is a slow, steady, and safe way to build money for big life goals like retirement, children’s education, or future security.
Start with any amount you can manage, even ₹500 a month. Stay regular, and over time compounding will do the heavy work for you. For beginners in India, PPF remains one of the simplest doors into the world of savings.
We hope this article helped you understand the Public Provident Fund (PPF) in a clear and practical way. To continue learning, you may also find our guides on Section 80C tax saving and basics of retirement planning useful.
Frequently Asked Questions (FAQs) on PPF
Who can open a PPF account for a minor child?
A guardian can open a PPF account on behalf of a minor child. The guardian can be the child’s biological father or mother, or any other legal guardian.
If the parents are deceased, other relatives such as an uncle, aunt, grandfather, or grandmother can also open the PPF account.
If the parents are alive but unable to manage the account, a legal guardian can open and manage the PPF account for the child.
Can I open a PPF account for my minor child if I already have one in my own name?
Yes, a resident individual can open one PPF account in their own name and can also open a separate PPF account for their minor child under their guardianship.
However, only one parent (either the mother or the father) can open and maintain a PPF account for the minor child. Both parents cannot have separate PPF accounts for the same child.
Can the guardian claim tax benefits for the amount invested in the minor’s PPF account?
Yes, the guardian is eligible for tax deductions on contributions made to both their own PPF account and the minor child’s PPF account under Section 80C.
However, the total deductions for both accounts cannot exceed the maximum limit of Rs. 1,50,000, which includes other eligible investments under Section 80C.
