Public Provident Fund (PPF) Complete Guide 2025 | Rules, Benefits, Withdrawal, Tax Exemption

The Public Provident Fund (PPF) is one of the most trusted saving options in India. Since it is backed by the Government of India, it gives investors a sense of safety along with steady returns and valuable tax benefits. That’s why both salaried people and self-employed professionals prefer it as a long-term plan.

In this guide, we’ll cover everything about PPF eligibility, rules, deposits, withdrawals, interest rates, tax benefits, account closure, and extension  along with real-life examples and clear FAQs so you can make confident decisions.

What is Public Provident Fund (PPF)?

The Public Provident Fund (PPF) is a long-term savings scheme started in 1968 by the Government of India. It is designed to encourage small savings and provide safe, guaranteed returns along with tax benefits.

• Started in: 1968 by the Ministry of Finance, Government of India
• Safety: 100% government-backed (sovereign guarantee)
• Purpose: Encourage small savings and provide secure, tax-free returns

Key Features and Rules of PPF

Here’s a quick reference guide to the most important rules and features of the Public Provident Fund (PPF). This summary makes it easier to remember key points without going into too much detail.

Feature	Details
Eligibility	Available for Indian residents (adults & minors). Not available for NRIs or HUFs.
Tenure	15 years (extendable in blocks of 5 years after maturity).
Deposits	Minimum ₹500 and maximum ₹1.5 lakh per financial year. Deposits allowed in lump sum or up to 12 instalments.
Interest Rate	Decided by the government every quarter. Currently around 7% (varies).
Withdrawals	Partial withdrawals allowed from 7th financial year; full withdrawal only at maturity.
Premature Closure	Allowed after 5 years under special conditions (education, medical treatment, NRI status) with 1% interest penalty.
Loan Facility	Available between 3rd and 6th years, up to 25% of the balance at end of 2nd year.
Tax Benefits	EEE(Exempt-Exempt-Exempt) status – Investment, interest, and maturity amount are all tax-free. Eligible for deduction under Section 80C.
Account Limit	Only one PPF account per individual
Inactive Account	Becomes inactive if annual deposit not made; revival requires ₹500 + ₹50 penalty per missed year

Why is PPF Popular?

• Safe & Risk-Free – Backed by the Government of India, making it one of the most secure investment options.
• Guaranteed Returns – No market risks, unlike stock market–linked investments.
• Tax Benefits – Eligible for deduction under Section 80C up to ₹1.5 lakh per year.
• Completely Tax-Free – Both interest earned and maturity proceeds enjoy 100% tax exemption.
• Long-Term Discipline – Comes with a 15-year lock-in that encourages regular savings.
• Perfect for Life Goals – Ideal for retirement planning, children’s higher education, or marriage funds.
• Stability with Growth – Best suited for individuals seeking a balance of safety, savings, and returns.

Eligibility for PPF Account

The Public Provident Fund (PPF) is meant for Indian residents, but not everyone can open an account. Here’s a clear breakdown of who is eligible and who is not:

Who Can Open a PPF Account?

• Indian Residents: Any resident individual can open a PPF account in their own name. For example, Prithvi, a salaried employee, can open a PPF account at his bank.
• Minors: Parents or legal guardians can open a PPF account for children.

Who Cannot Open a PPF Account?

• Non-Resident Indians (NRIs): NRIs cannot open new accounts. But if Prithvi opened a PPF account in India and later moved abroad, he can continue the account until maturity but cannot extend it.
• Hindu Undivided Families (HUFs): Not eligible to open a PPF account.

Key Rules and Limitations to remember while opening a PPF Account

• The maximum deposit limit of ₹1.5 lakh per financial year applies across both your own account and your minor child’s account combined.
• Each person can hold only one PPF account in their own name (excluding minor accounts). So if you already have a PPF account, you cannot open another one for yourself.
• Joint Accounts are not allowed. PPF is strictly for individuals only – so multiple persons cannot open a joint PPF account together.

Tenure of PPF Account and Extension Options

A Public Provident Fund (PPF) account is designed for long-term savings. It comes with a fixed lock-in period of 15 years, but also offers flexibility once it matures.

Default Tenure of PPF Account

• The standard tenure of a PPF account is 15 years.
• The tenure is calculated from the end of the financial year in which the account is opened – not the exact date of opening.

Example: Prithvi opened his PPF account in August 2025. The lock-in will be counted from March 31, 2026, and his account will mature on March 31, 2041 (15 years later).

Extension of PPF Account After Maturity

After the initial 15 years, you can extend your PPF account in blocks of 5 years. There are two extension choices:

• Extension with Contribution: You continue depositing money every year, and it keeps earning interest.
• Extension without Contribution: You stop deposits, but the existing balance continues to earn interest until closure.

Example: After completing 15 years in March 2041, Prithvi chose to extend his PPF with contributions, depositing ₹1.5 lakh annually. This helped him build a larger retirement fund.

Key Rules for PPF Tenure and Extension

• You must inform your bank or post office about extension within one year of maturity.
• Once you choose an option (with or without contribution), it cannot be changed for that 5-year block.
• You can extend your account multiple times in 5-year blocks.

For Example: Prithvi extended his account twice – first with contributions from 2041–2046, and then without contributions from 2046–2051. This gave him both growth and flexibility as he approached retirement.

Deposits in PPF – Minimum, Maximum, and Frequency

One of the reasons the Public Provident Fund (PPF) is popular is its flexibility in deposits. You don’t need a large amount to maintain the account, but you also have the option to invest up to the maximum allowed limit every year.

Minimum and Maximum Deposits in PPF

• Minimum Deposit: ₹500 is the minimum deposit required per financial year to keep the account active.
• Maximum Deposit: ₹1.5 lakh per financial year is the maximum limit(combined limit across all accounts, including minor accounts).

Example: Prithvi deposited only ₹500 in one year to keep his account active when he had tight finances. In another year, he deposited the maximum ₹1.5 lakh to get full tax benefits under Section 80C.

Frequency of Deposits in PPF

• You can deposit in one lump sum or spread it out in instalments.
• A maximum of 12 deposits are allowed in a financial year.
• Deposits can be made through cash, cheque, demand draft, or online transfer (if your bank supports it).

Example: To stay disciplined, Prithvi decided to deposit ₹12,500 every month before the 5th. This way, by the end of the financial year, his total investment reached ₹1.5 lakh, and every instalment earned interest from that month onward.

What Happens If You Miss the Minimum Deposit?

If you fail to deposit at least ₹500 in a financial year, your PPF account will be marked as inactive from the next financial year. Here’s everything you need to know:

• When does it become inactive? – After the first financial year in which no deposit is made (from 1st April of the following year).
• Does the balance still earn interest? – Yes, the existing balance continues to earn interest at the prevailing PPF rate.
• Can I deposit money again? – No, fresh deposits are not allowed until the account is reactivated.
• What do I need to do to reactivate? – Pay a penalty of ₹50 per default year plus the minimum deposit of ₹500 for each missed year.
• Can I reactivate after many years? – Yes, there is no time limit. You can revive even after 5, 10, or more years.
• What facilities are restricted? – You cannot make fresh deposits, take loans, or withdraw money until revival.

Example: Prithvi forgot to deposit in FY 2026–27. From 1st April 2027, his account became inactive. His balance of ₹2,50,000 kept earning interest, but he could not deposit new money or claim tax benefits. In FY 2030–31, he decided to revive it by paying ₹200 penalty (₹50 × 4 years) plus ₹2,000 as missed deposits (₹500 × 4 years). After that, the account will be fully active again.

Myth vs Fact About PPF Reactivation

• Myth: A PPF account can only be reactivated if it has been inactive for less than 2 years.
• Fact: There is no such time limit. Even if your account has been inactive for 5, 10, or more years, you can revive it anytime by paying the penalty and missed minimum deposits.

How PPF Interest is Calculated ?

One of the most important things to understand about the Public Provident Fund (PPF) is how interest is calculated. Unlike a fixed deposit where interest is applied on the full deposit from the day of investment, PPF has a special rule for interest calculation.

Basic Rule of PPF Interest Calculation

• Interest is calculated on the lowest balance between the 5th and the last day of every month.
• Interest is credited to the account at the end of each financial year (on 31st March).
• The rate of interest is decided by the government every quarter (currently around 7.1%).

Key Scenarios for PPF Interest Calculation

• Deposit before the 5th of a month: The money earns interest for that month.
• Deposit after the 5th of a month: Interest starts only from the next month.
• Lump sum at the start of year (before 5th April): Maximum interest, as the full amount earns for all 12 months.
• Monthly deposits before 5th: Each installment earns from that month onward.
• Monthly deposits after 5th: Each installment loses one month’s interest.

Example 1: Lump Sum vs Monthly Deposit

Prithvi invested ₹1.5 lakh in his PPF account:

• If he deposited the full amount on 2nd April, the entire ₹1.5 lakh earned interest for all 12 months.
• If he deposited ₹12,500 every month before the 5th, each instalment earned interest from that month onward, but the total yearly interest was slightly lower than the lump sum option.
• If he deposited after the 5th each month, he lost one month’s interest on each instalment – reducing his total earnings even more.

Example 2: Deposit Timing in a Month

Prithvi deposited ₹50,000 on 3rd June. Since it was before the 5th, the amount earned interest from June itself. But if he deposited the same ₹50,000 on 7th June, interest would start only from July.

Other Scenarios You Should Know about PPF Interest Calculation

• If no deposits are made in a year or the account is inactive: Interest is still earned on the existing balance.
• If partial withdrawal is taken: Interest is calculated on the reduced balance from that month onward.
• If extended after 15 years: Interest is still calculated in the same way – lowest balance between 5th and last day of the month.

Quick Tips to Maximize PPF Interest

• Deposit the full annual amount (up to ₹1.5 lakh) before 5th April every year to maximize returns.
• If depositing monthly, always invest before the 5th of the month.
• Avoid delays in deposits, as even one day can make you lose a month’s interest.

PPF Withdrawal Rules – Partial, Premature, and Full Maturity

The Public Provident Fund (PPF) is a long-term investment with a 15-year lock-in. Still, there are certain situations where withdrawals are allowed. Let’s look at the rules and examples.

1. Full Withdrawal at Maturity

• The full balance (principal + interest) can be withdrawn after the 15-year maturity.
• The maturity amount is completely tax-free.
• You can also extend the account in 5-year blocks instead of withdrawing.

Example: Prithvi opened his PPF account in August 2025. His account will mature on 31st March 2041, when he can withdraw the full amount or extend it for another 5 years.

2. Partial Withdrawals After 7 Years

• Allowed from the 7th financial year onward.
• Limit: Up to 50% of the balance at the end of the 4th year or the preceding year, whichever is lower.
• Only one withdrawal is allowed per financial year.

Example: Prithvi opened his account in FY 2025–26. By FY 2032–33 (7th year), his balance was ₹6,00,000. The balance at the end of FY 2029–30 was ₹4,00,000. He could withdraw up to ₹2,00,000 (50% of ₹4,00,000).

3. Premature Closure After 5 Years

• Allowed only after 5 financial years.
• Permitted in cases of:
  • Medical emergencies (self/family).
  • Higher education.
  • Change of residency (becoming an NRI).
• A 1% reduction in interest applies on premature closure.

Example: Prithvi needed funds for his daughter’s higher studies in FY 2031–32. Since 6 years had passed, he closed the account prematurely. His total interest earned was reduced by 1% as per rules.

PPF Loan Facility – Eligibility, Limits, and Repayment

The Public Provident Fund (PPF) not only helps you save for the long term but also gives you access to short-term liquidity through a loan facility. This can be very useful during financial emergencies.

When Can You Take a Loan Against PPF?

• You can take a loan only between the 3rd and 6th financial year of opening the account.
• Loan facility is not available before 3 years or after 6 years.

Example: Prithvi opened his PPF account in FY 2025–26. He became eligible for a loan from FY 2027–28 and remained eligible until FY 2030–31. After that, loan facility was no longer available.

How Much Loan Can You Take?

• The maximum loan amount is 25% of the balance at the end of the 2nd year preceding the loan year.

Example: Prithvi applied for a loan in FY 2029–30. His balance at the end of FY 2027–28 was ₹2,00,000. He could take a maximum loan of ₹50,000 (25% of ₹2,00,000).

Repayment Rules for PPF Loan

• The loan must be repaid within 36 months (3 years).
• Repayment is done in lump sum or installments.
• The loan carries an interest rate of 1% higher than the prevailing PPF interest rate.

Example: Prithvi borrowed ₹40,000 from his PPF in 2029 at an interest rate of 7.1% + 1% = 8.1%. He repaid the loan in 24 months and paid interest on the outstanding balance as per rules.

Tax Benefits of PPF – Section 80C Deductions and EEE Status

One of the biggest reasons people invest in the Public Provident Fund (PPF) is the tax benefit it offers. PPF is among the few instruments that enjoy EEE (Exempt-Exempt-Exempt) status – meaning your investment, interest earned, and maturity proceeds are all tax-free.

1. Deduction Under Section 80C

• You can claim a deduction of up to ₹1.5 lakh per year under Section 80C of the Income Tax Act.
• This reduces your taxable income, lowering your overall tax liability.
• Deposits made in your own, spouse’s, or child’s PPF account are eligible – but within the combined ₹1.5 lakh limit.

Example: Prithvi earns ₹10,00,000 annually. By investing ₹1,50,000 in PPF during FY 2025–26, his taxable income reduces to ₹8,50,000. This directly cuts down his tax outgo depending on his slab.

2. Tax-Free Interest

• The interest credited every year is completely tax-free.
• This makes PPF superior to fixed deposits, where interest is fully taxable.
• The tax-free compounding effect helps your corpus grow faster over time.

Example: Prithvi invested ₹1,20,000 in PPF for FY 2025–26. At an interest rate of 7.1%, he earned ₹8,520 in tax-free interest for the year. This amount compounded every year without any tax deduction.

3. Tax-Free Maturity

• At the end of 15 years, the entire maturity amount (principal + accumulated interest) is exempt from tax.
• This makes PPF one of the safest and most tax-efficient long-term investment options.

Example: Prithvi invested the maximum ₹1.5 lakh every year for 15 years. At maturity, his corpus grew to around ₹40 lakh (at 7.1% assumed rate). The entire amount, including interest, was tax-free.

4. Tax Planning for Families

• You can open PPF accounts for your spouse and children as well.
• While the tax deduction remains capped at ₹1.5 lakh for the depositor, this helps in creating multiple long-term, tax-free savings accounts within the family.

Example: Prithvi deposited ₹1.5 lakh in his own account and ₹50,000 in his child’s account. Though his tax benefit was capped at ₹1.5 lakh, the child’s account balance also grew tax-free – helping the family build a larger safe corpus.

Documents Required to Open a PPF Account

Opening a Public Provident Fund (PPF) account is simple, but you need to provide a few documents for verification. Whether you open it at a bank or a post office, the list is largely the same with slight differences.

Basic Documents Required for PPF Account

• Identity Proof: Aadhaar Card, Voter ID, Passport, Driving License, or PAN Card.
• Address Proof: Aadhaar Card, Passport, Utility Bills (electricity, water, gas), or bank statement.
• PAN Card: Mandatory for opening a PPF account.
• Photographs: Recent passport-size photos (usually 2).
• PPF Account Opening Form: Filled and signed (Form A in post office or bank’s format).
• Nomination Form: Optional, but recommended (Form E/DA-1).

Additional Requirements at Banks vs Post Office

• In Banks: Some banks may ask for an existing savings account or customer ID for linking.
• In Post Office: A Post Office Savings Account may be required for linking online services and withdrawals.

Example: Prithvi decided to open a PPF account in a nearby bank. He submitted his Aadhaar (ID + address proof), PAN card, 2 photographs, and signed the bank’s PPF account opening form. Later, when his friend opened it in a post office, she was also asked to provide her Post Office Savings Account number for linking.

How to Withdraw Money from PPF Before 15 Years

Normally, the Public Provident Fund (PPF) has a 15-year lock-in, but there are certain cases where you can access your money earlier. These include partial withdrawals after 7 years and premature closure after 5 years under special conditions.

1. Partial Withdrawals After 7 Years

• You can start making partial withdrawals from the 7th financial year onward.
• The limit is up to 50% of the balance at the end of the 4th year, or the preceding year, whichever is lower.
• Only one withdrawal is allowed per financial year.

Example: Prithvi opened his PPF account in FY 2025–26. From FY 2032–33 (the 7th financial year), he became eligible for partial withdrawal. If his balance was ₹6,00,000 in FY 2031–32 and ₹4,00,000 in FY 2029–30, the withdrawal limit was ₹2,00,000 (50% of the lower balance).

2. Premature Closure After 5 Years

• Permitted only after completing 5 financial years.
• Allowed under specific conditions:
  • Higher education expenses (self or children).
  • Medical emergencies for self or family.
  • Change in residency (becoming an NRI).
• A 1% reduction in the applicable interest rate is applied on the entire balance.

Example: In FY 2031–32, Prithvi needed funds for his daughter’s higher education. Since 6 years had passed since opening his account, he applied for premature closure. His request was approved, but the total interest earned was reduced by 1% as per the rules.

3. Emergency Fund Access

• PPF withdrawals are not as flexible as savings accounts, but they act as a safety net in unavoidable situations.
• If you need funds before 15 years, always compare whether a partial withdrawal or premature closure suits your situation better.

Annual vs Monthly Deposit in PPF – Which is Better?

One unique feature of the Public Provident Fund (PPF) is that you can choose how to deposit – either in a lump sum once a year or in monthly instalments. Both options are allowed, but the timing of deposits directly affects how much interest you earn.

Annual Lump Sum Deposit

• If you deposit the full ₹1.5 lakh before the 5th of April, the amount earns interest for all 12 months of the year.
• This is the most efficient way to maximize interest earnings.

Example: Prithvi deposited ₹1.5 lakh in one go on 2nd April 2025. Since it was before the 5th, the entire amount earned interest for the full financial year.

Monthly Instalments

• You can deposit in instalments (up to 12 per year).
• If deposited before the 5th of each month, each instalment earns interest from that month onward.
• If deposited after the 5th, interest starts only from the following month, leading to lower earnings.

Example: Prithvi deposited ₹12,500 every month before the 5th. By the end of the year, his total deposits were ₹1.5 lakh, and each instalment earned interest from its respective month. If he had deposited after the 5th, he would have lost one month’s interest on each instalment.

Which Option is Better?

• Lump sum before 5th April: Best for maximizing interest.
• Monthly before 5th: Good for disciplined savers who cannot invest a big amount at once.
• Monthly after 5th: Least efficient, as it reduces interest earnings.

Tip: If you have surplus funds at the beginning of the year, choose lump sum. If you prefer spreading out savings, make sure deposits are done before the 5th of each month.

PPF Rules for Minor Accounts – Parent and Child Limitations

A Public Provident Fund (PPF) account can also be opened for a minor by a parent or guardian. However, the combined deposit rules often confuse investors. Here’s what you should know.

Opening a Minor’s PPF Account

• Parents or legal guardians can open a PPF account on behalf of a minor child.
• All standard rules of PPF apply – minimum ₹500 and maximum ₹1.5 lakh per year.
• The account operates in the name of the minor, but the parent/guardian manages it until the child turns 18.

Combined Deposit Limit Rule

• The total deposit across parent and minor’s accounts cannot exceed ₹1.5 lakh in a financial year.
• If you invest the full ₹1.5 lakh in your own account, you cannot invest in your child’s account in the same year (and vice versa).
• Any excess deposit will not earn interest or tax benefits.

Example: Prithvi deposited ₹1.5 lakh in his own PPF account in FY 2026–27. He also deposited ₹50,000 in his daughter’s PPF account. As per rules, the combined limit is ₹1.5 lakh, so the extra ₹50,000 did not earn any interest or tax benefit.

Tax Implications for Minor Accounts

• Deposits made in a minor’s account are eligible for deduction under Section 80C – but only within the ₹1.5 lakh limit.
• Interest earned in the minor’s account is also tax-free.
• For tax purposes, the parent’s contribution is considered as their own investment.

PPF Account for NRIs – Rules and Restrictions

The Public Provident Fund (PPF) is available only to Indian residents. Non-Resident Indians (NRIs) are restricted under the scheme, but there are specific rules for those who opened their account before moving abroad.

Can NRIs Open a New PPF Account?

• No, NRIs are not allowed to open a new PPF account.
• Only Indian residents (adults or minors) are eligible to start one.

What If You Become an NRI After Opening PPF?

• If you already have a PPF account and later become an NRI, you can continue the account until its 15-year maturity.
• You are allowed to make contributions within the ₹1.5 lakh yearly limit, but only through an NRE/NRO account.
• However, you cannot extend the account beyond 15 years once it matures.

Example: Prithvi opened a PPF account in 2025 while he was living in India. In 2030, he moved abroad and became an NRI. He continued to maintain his PPF account by contributing from his NRO account until 2041. At maturity, he had to withdraw the full amount as extension was not allowed.

Withdrawal Rules for NRIs

• An NRI can withdraw the full balance at maturity (15 years).
• Partial withdrawals after the 7th year are also permitted, just like residents.
• The maturity proceeds remain tax-free in India, but may be taxable in the country of residence.

PPF Nomination Rules and Death Claim Process

The Public Provident Fund (PPF) allows account holders to nominate one or more people who can claim the account balance in case of death. Understanding nomination rules is important to ensure smooth transfer of funds to your family.

Nomination Rules in PPF

• You can nominate one or more persons for your PPF account.
• Nominations can be made at the time of opening the account or added later.
• You can also change or cancel the nomination anytime by submitting the required form.
• If multiple nominees are added, the percentage share must be specified.

Example: Mr. X opened his PPF account in 2025 and nominated his wife as the beneficiary. In 2030, after having two children, he updated the nomination to include them with equal shares of 33.3% each.

Death Claim Process for PPF

• In case of the account holder’s death, the nominee/legal heir can claim the balance.
• The account does not continue after death; it is closed and proceeds are paid to the nominee.
• Required documents generally include:
  • Claim form (Form G in post office or bank’s format).
  • Death certificate of the account holder.
  • Identity and address proof of the nominee.
  • Passbook of the deceased account holder (if available).

Example: After Mr. X unfortunate death, his nominee (wife) submitted Form G along with his death certificate and her Aadhaar card. The bank closed the account and transferred the full balance to her account.

Important Points to Remember

• If no nomination exists, the legal heirs must provide a succession certificate or legal documents to claim.
• Nominees cannot continue the account; they can only withdraw the balance.
• Interest is payable up to the end of the month preceding the month in which death occurs.

How to Open a PPF Account – Step-by-Step Process

You can open a Public Provident Fund (PPF) account either through a bank or a post office. The process is simple and almost identical in both cases, though banks also offer online options.

Steps to Open a PPF Account in a Bank

1. Visit the branch of your chosen bank (SBI, ICICI, HDFC, etc.).
2. Fill out the PPF Account Opening Form (usually available as Form A or the bank’s own format).
3. Submit required documents:
   • Identity proof (Aadhaar, Passport, PAN, etc.).
   • Address proof (Aadhaar, utility bill, bank statement).
   • PAN card (mandatory).
   • Passport-size photographs.
4. Deposit the minimum amount (₹500 or more).
5. Once verified, your PPF account is opened, and you receive a passbook or online access.

Steps to Open a PPF Account in a Post Office

1. Visit your nearest post office branch.
2. Collect and fill out the PPF Account Opening Form (Form A).
3. Attach required documents (same as bank: Aadhaar, PAN, photos, etc.).
4. If you want online facilities, you may also need to link a Post Office Savings Account.
5. Deposit the minimum ₹500 or more to activate the account.
6. The post office issues a PPF passbook with details of deposits, withdrawals, and interest.

Online Opening of PPF Account

• Available in many banks through internet banking or mobile apps.
• You must already have a savings account with the bank to use this facility.
• Documents are verified electronically, and the PPF account is linked to your bank account.

Example: Prithvi wanted to open a PPF account. Since he already had a savings account in SBI, he applied online through internet banking by submitting his Aadhaar and PAN details digitally. His account was opened instantly, and he started depositing online from his savings account.

PPF vs Other Investment Options – FD, ELSS, NPS, NSC

Before choosing where to invest, it’s important to compare the Public Provident Fund (PPF) with other common savings and tax-saving instruments. Each option has its own benefits and limitations..

Comparison Table – PPF vs Other Investments

Investment	Lock-in Period	Returns	Tax Treatment	Risk Level
PPF	15 years	~7.1% (govt fixed)	EEE – Fully tax-free	Very Low
FD	7 days – 10 years	~6–7%	Interest fully taxable	Low
ELSS	3 years	Market-linked (10–12% avg.)	Taxed at 10% on gains	Medium to High
NPS	Till 60 years	Market-linked	Partial tax-free + annuity taxable	Medium
NSC	5 years	~7.7%	Interest taxable (but reinvested counts for 80C)	Low

 

PPF Account Closure, Maturity, and Extension Rules

A Public Provident Fund (PPF) account has a fixed tenure of 15 years. Once it matures, you can choose to withdraw, close, or extend the account. Let’s look at the rules in detail.

1. Closure of PPF Account at Maturity

• After completing 15 years, you can close your PPF account and withdraw the full balance.
• The maturity proceeds (principal + interest) are completely tax-free.
• You must apply for closure using the prescribed form at your bank or post office.

Example: Prithvi opened his PPF account in August 2025. His account matured on 31st March 2041. He applied for closure and received the full maturity amount of around ₹40 lakh, completely tax-free.

2. Extension of PPF Account

• After 15 years, you can extend the account in blocks of 5 years.
• Extension can be done with or without further contributions.
• You must inform the bank or post office within 1 year of maturity about your choice.

Extension with Contribution

• You can continue depositing up to ₹1.5 lakh every year.
• Withdrawals are allowed once per financial year during the extended block.

Example: Prithvi extended his account for 5 years with contributions after 2041. He continued depositing ₹1.5 lakh annually and also withdrew ₹2 lakh once during each year when required.

Extension without Contribution

• You stop making deposits, but the existing balance continues to earn interest.
• You can withdraw any amount once per year.

Example: After 2046, Prithvi extended his account without further contributions. He did not deposit fresh money but continued earning interest on his existing balance and withdrew funds as needed.

3. What If You Do Nothing at Maturity?

• If you don’t apply for closure or extension, the account automatically continues but without contributions.
• The balance will keep earning interest until you withdraw.
• However, you cannot make fresh deposits unless you formally extend with contributions.

Common Misconceptions About PPF

Despite being one of the most popular savings schemes, the Public Provident Fund (PPF) is often misunderstood. Here are some of the most common myths and the actual facts.

Myth 1: You Can Open Multiple PPF Accounts

• Fact: Only one PPF account is allowed per individual. Joint accounts are not permitted.

Example: Prithvi wanted to open one account in SBI and another in the post office. He later found out it wasn’t possible since only one account is allowed per person.

Myth 2: NRIs Can Open Fresh PPF Accounts

• Fact: NRIs cannot open a new PPF account. If you become an NRI after opening, you may continue until maturity but cannot extend further.

Myth 3: You Can Deposit More Than ₹1.5 Lakh for Extra Interest

• Fact: The maximum deposit limit is ₹1.5 lakh per year. Any excess amount will not earn interest or tax benefits.

Example: Prithvi deposited ₹2 lakh in FY 2027–28, but only ₹1.5 lakh was eligible. The extra ₹50,000 earned no interest and gave no tax benefit.

Myth 4: You Can Withdraw Anytime Like a Savings Account

• Fact: Withdrawals are restricted. Partial withdrawals are allowed only from the 7th year, and full withdrawal is possible only at maturity or under special conditions.

Myth 5: Inactive Accounts Cannot Be Revived

• Fact: Inactive PPF accounts can be revived anytime by paying ₹50 penalty per missed year plus ₹500 minimum deposit per missed year.

Example: Prithvi forgot to deposit for 3 years. He revived his account by paying ₹150 penalty and ₹1,500 for missed deposits.

Myth 6: PPF Interest Rate Is Fixed Forever

• Fact: The government reviews and may revise PPF interest rates every quarter. It is not permanently fixed.

Myth 7: Nominees Can Continue the Account After Death

• Fact: A PPF account is closed on the account holder’s death. Nominees can only claim the balance, not continue the account.

Advantages and Disadvantages of PPF

The Public Provident Fund (PPF) is considered one of the safest and most reliable investment options in India. However, like any financial product, it has both strengths and limitations. Let’s look at the pros and cons clearly.

Advantages of PPF

• Government-backed safety: PPF is backed by the Government of India, making it one of the safest investment options.
• Tax benefits: Enjoys EEE (Exempt-Exempt-Exempt) status – investment, interest, and maturity are all tax-free.
• Affordable minimum deposit: Start with as little as ₹500 per year.
• Decent long-term returns: Interest rate (currently around 7.1%) is higher than a regular savings account.
• Loan facility: Available between the 3rd and 6th year.
• Partial withdrawal flexibility: Allowed after the 7th financial year.
• Retirement-friendly: A disciplined 15-year lock-in helps build a long-term corpus.

Disadvantages of PPF

• Long lock-in period: Money is locked for 15 years, which may not suit those needing liquidity.
• Deposit limit: Maximum contribution is capped at ₹1.5 lakh per year, restricting high net-worth investors.
• Interest rate revisions: The government revises rates quarterly, so returns may change.
• Limited withdrawals: Only partial withdrawals allowed after 7 years, and once per year in extension periods.
• Not suitable for short-term goals: Better for long-term wealth building, not for quick returns.

FAQs on PPF (Public Provident Fund)

Here are answers to some of the most frequently asked questions about the Public Provident Fund (PPF). These cover eligibility, deposits, withdrawals, tax benefits, and rules.

Q1. Who can open a PPF account?

Any Indian resident (adult or minor) can open a PPF account. NRIs and HUFs are not eligible.

Q2. What is the lock-in period of PPF?

The lock-in period is 15 years, counted from the end of the financial year in which the account was opened.

Q3. What is the minimum and maximum deposit in PPF?

You must deposit at least ₹500 per year, and the maximum limit is ₹1.5 lakh per year.

Q4. Can I have more than one PPF account?

No, only one account is allowed per individual. Joint accounts are also not permitted.

Q5. Is the PPF interest rate fixed?

No, the interest rate is set by the government and reviewed every quarter. Currently, it is around 7.1%.

Q6. Can I withdraw money from my PPF account before maturity?

Yes, partial withdrawals are allowed from the 7th year. Full withdrawal is possible only at maturity, except in cases of premature closure (education or medical reasons).

Q7. What happens if I don’t deposit the minimum ₹500 in a year?

Your account becomes inactive. It can be revived by paying ₹500 + ₹50 penalty for each missed year.

Q8. Can NRIs invest in PPF?

NRIs cannot open a new account. If you become an NRI after opening, you can continue the account until maturity but cannot extend it further.

Q9. What are the tax benefits of PPF?

PPF enjoys EEE status. Investment is deductible under Section 80C (up to ₹1.5 lakh), interest earned is tax-free, and the maturity amount is exempt from tax.

Q10. Can I take a loan against my PPF balance?

Yes, between the 3rd and 6th year, you can take a loan of up to 25% of the balance at the end of the 2nd preceding year.

Q11. Can I transfer my PPF account?

Yes, you can transfer your PPF account from one bank or post office to another without losing benefits.

Q12. What happens to a PPF account after death of the account holder?

The account is closed, and the balance is paid to the nominee/legal heirs. It cannot be continued.

Q13. Can I extend my PPF account after maturity?

Yes, you can extend in blocks of 5 years, with or without contributions.

Q14. What is the penalty for premature closure?

Premature closure is allowed after 5 years under specific conditions (higher education, medical emergency) with a 1% reduction in the interest rate earned.