Public Provident Fund (PPF) is not just an investment; it is an emotion for Indian families. Whether it is a father opening an account for his newborn daughter or a salaried employee saving tax, PPF is the first choice.
Why? Because it offers the rare Triple E (EEE) Benefit:
- Exempt: Your Investment is Tax-Free (under Section 80C).
- Exempt: The Interest Earned is Tax-Free.
- Exempt: The Final Maturity Amount is 100% Tax-Free.
Backed by the Government of India, it carries “Sovereign Guarantee”—meaning zero risk of default. But in 2026, is 7.1% interest enough to beat inflation? This 1,500-word guide covers everything: Calculator, Rules, Hidden Benefits, and the “PPF vs Mutual Fund” debate.
Free PPF Calculator
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PPF Calculator
How is PPF Interest Calculated? (The 5th Date Rule)
This is a hidden rule most investors don’t know, and they lose thousands of rupees because of it.
The Rule: Interest for the month is calculated on the lowest balance between the 5th and the last day of the month.
Scenario A (Smart Investor):
- Deposit Date: 4th April
- Your money earns interest for the entire month of April.
Scenario B (Late Investor):
- Deposit Date: 6th April
- Your money earns ZERO interest for April. You lost 30 days of compounding.
Pro Tip: Always set your SIP or deposit date on or before the 5th of every month.
Key Features of PPF Account (2026 Rules)
1. Tenure and Extension
- Original Tenure: 15 Years.
- Extension: You can extend it in 5-year blocks (15 -> 20 -> 25…).
- Benefits: During extension, you can choose to contribute or just let the existing balance grow.
2. Investment Limits
- Minimum: ₹500 per year (Mandatory to keep account active).
- Maximum: ₹1.5 Lakh per year.
- Check: If you deposit ₹2 Lakhs by mistake, the extra ₹50,000 will be refunded without any interest calculation.
3. Loan Against PPF
- When: Available from the 3rd financial year to the 6th financial year.
- Rate: Just 1% above the PPF interest rate.
- Why use it: It is arguably the cheapest loan available in India, cheaper than any Personal Loan.
PPF vs Mutual Funds: Comparison Table
Many people choose PPF blindly. But let’s look at the numbers. To retire rich, you need to beat inflation (6%). PPF gives 7.1%. That’s a real return of just 1.1%.
Comparison: ₹1.5 Lakh/Year Limit
| Feature | Public Provident Fund (PPF) | Mutual Fund (ELSS / Flexi Cap) |
|---|---|---|
| Safety | High (Govt Backed) | Moderate (Market Linked) |
| Return | 7.1% Fixed | 12% – 15% Average |
| Lock-in | 15 Years (Hard Lock) | 3 Years (ELSS) or Liquid (Open) |
| Max Limit | ₹1.5 Lakh / Year | No Limit |
| Partial Withdrawal | Very strict (After 7 years) | Anytime (If not ELSS) |
The Cost of Safety: 15 Years of Data
If you invested ₹1.5 Lakh every year for 15 years:
- In PPF: You get ₹40 Lakhs
- In Mutual Fund (12%): You get ₹63 Lakhs
Difference: You lost ₹23 Lakhs just to feel “Safe”.
Partial Withdrawals and Premature Closure
Can you take money out before 15 years? Yes, with conditions.
- Partial Withdrawal: Allowed from the 7th Financial Year.
- Limit: You can withdraw 50% of the balance at the end of the 4th preceding year OR the immediate preceding year (whichever is lower).
- Premature Closure: Allowed only after 5 complete years for serious reasons like:
- Medical treatment of life-threatening diseases.
- Higher education of children.
- Penalty: 1% interest will be deducted from the date of opening.
PPF for NRI (Non-Resident Indians)
- Can NRIs open a new PPF? No.
- Can they continue an existing one? Yes, if you opened it while you were a Resident Indian, you can continue it until maturity (15 years). However, you cannot extend it after maturity.
Conclusion
Despite the lower returns compared to Mutual Funds, PPF is still a must-have for:
- Conservative Investors: Who cannot sleep if the market drops 1%.
- Tax Savers: Who want to fill the 80C limit (though ELSS is better).
- Daughter’s Marriage: It is a good debt component for long-term goals.
The Smart Portfolio Strategy (Asset Allocation): Don’t put 100% in PPF.
- Step 1: Fill ₹1.5 Lakh in PPF (Safety Net).
- Step 2: Put the rest of your surplus in Flexi Cap Mutual Funds (Wealth Creation).
Use our tools to plan better: Ready to take risk? Check SIP Calculator | OR Want Monthly Income? Check SWP Calculator
Disclaimer: PPF interest rates are subject to change quarterly by the Ministry of Finance. Historical performance of Mutual Funds does not guarantee future returns.