Public Provident Fund

Investments for Wealth Generation

What is a Public Provident Fund?

Commonly known as PPF, the public provident fund is an Indian Government initiative with the objective to provide old-age financial security for employees.

This scheme is voluntary and the current interest rate is 8.0% per annum. It is fondly opted as it gets tax exemptions on deposits, maturity amount and the interest earned. This motivates and encourages investments.

Loans against PPF is permissible from the third year of investment. Premature closure is allowed after 5 years for the purpose of medical treatment or higher education and in case of account holder’s death.

Risk averse investors who can remain invested for 15 years or more to achieve long term goals and seek guaranteed returns through regular investments.

Investors willing to invest for 15 years and earn high returns by having equity exposure in their investments.

  • Equity Mutual Funds 
  • Direct Stock Investing
  • National Pension System for retirement


  • RiskIt is completely risk-free making it the best choice for risk averse investors.
  • ReturnsThe current interest rate is 8.0% p.a. (announced every quarter by Ministry of Finance, India) and is lined with G-sec rates.
  • TaxationPopularly known for its “Exempt-Exempt-Exempt (EEE)” status. The deposits, interest and the maturity amount is tax free.
  • Lock-in Limitations15 years plus an extension of 5 years. However the contributions has to be made for 16 years.
  • WithdrawalsPremature withdrawals happen only in the event of the account holder’s death or post 5 years under specific conditions.
  • Capital ProtectionIt is a Government scheme so the capital is completely secure.
  • Inflation ProtectionWhen inflation is above interest, the account earns no real returns.

Investment Goal

It is an Indian Government initiative with the objective to provide guaranteed returns and also tax deductions on the interest, returns and maturity amount.

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EligibilityThe account holder has to be an Indian Resident
Entry AgeNo age barriers.
Fee Structure (Account Opening Fee & Maintenance Charges)

  • Minimum amount is Rs. 500 p.a.

  • The upper limit is Rs.1.5 lakh p.a.

  • The maximum number of deposits in a financial year is 12.

InterestInterest rate is 8.0% p.a. (Compounded annually).
Tenure15 years plus an extension of 5 years.
Exit OptionPremature closure is not allowed unless the death of the account holder or after completing 5 years under certain conditions.
Account Holding CategoriesIndividuals and Minors through a guardian.
Nomination facilityThis provision is available.

Capital & Inflation Protection

Since this scheme is backed by the Indian Government, your investment capital is completely risk-free.

There is no protection when the rate of inflation is more than the rate offered by the public provident fund. Hence the account earns no real returns.


The interest rate currently is 8.0% per annum and is in line with the G-sec rates of similar maturity (spread of 0.25%). The Ministry of Finance, Indian Government provides the PPF interest rates every quarter.


  • PPF comes with a lock-in period of 15 years (and an extension of 5 years).  However from the 3rd year, loans against PPF is permissible and from the 7th year withdrawals are allowed but are subjected to conditions.
  • Closure before 5 years is allowed only if the money is required for medical treatment or higher education. Generally, PPF closure takes place in the case of account holders death.

Tax Implications

  • Best known for its tax status “Exempt-Exempt-Exempt”, i.e. the deposits, interest earned and the maturity amount is free form tax.
  • Under Section 80(C) of the Income Tax Act, the investment amount receives deductions up to Rs. 1.5 lakh yearly.
  • The deposit in PPF account are also exempt from wealth tax.

Account Setup Information

How to open?

An account can be opened in any head or general post-office, State Bank of India, Branches of nationalised banks and even at Private-sector banks like ICICI Bank.

The following documents are required for the account opening process:

  • Account opening form.
  • Passport size photographs – two
  • Aadhar card or acknowledgement of application in its absence.
  • Address and Identity Proof such as: PAN, Aadhar Card, declaration of Form 60 or 61, Driver’s License, Voter’s ID or Ration Card. (Carry originals of ID proof during account opening for verification purpose.)
  • Opt a nominee.

How to operate?

The account holder must use a pay-in-slip and credit the initial account opening amount to his/ her account. You receive a passbook that has your photo affixed, also stating the name of the nominee.

Online Access

Only few banks offer the facility of opening a PPF account online.  

Key Takeaways

  • The scheme is backed by the Government of India and investors earn guaranteed returns.
  • The best scheme to enjoy tax exemptions on the deposits, interest earned and maturity amount. Also receive tax deductions under Section 80(C).
  • The scheme’s interest rates are aligned with G-secs of similar maturity and does not provide inflation cover.
  • The scheme comes with a lock-in period of 15 years and can be extended to another 5 years. Premature closure is allowed under certain conditions post 5 years or in the event of the account holder’s death.

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