What is PPF (Public Provident Fund)?
The Public Provident Fund (PPF) is one of India’s oldest, safest and most tax-efficient investment options for long-term wealth creation. It is a government-backed savings scheme offering guaranteed interest, complete safety of capital, and triple tax exemption (EEE) — meaning the investment, the interest earned, and the maturity amount are all tax-free.
PPF Tax Benefits for FY 2025-26
PPF enjoys the coveted EEE (Exempt-Exempt-Exempt) tax status:
- Exempt at investment: Contributions up to ₹1.5 lakh per year qualify for deduction under Section 80C. This directly reduces your taxable income.
- Exempt on interest: Interest earned (currently 7.1% p.a.) is completely exempt from income tax. No TDS is deducted either.
- Exempt at maturity: The entire maturity amount — principal + accumulated interest — is tax-free in your hands.
Important: PPF tax benefits are only available under the old tax regime. If you have chosen the new tax regime, you cannot claim the 80C deduction for PPF investments.
How Much Tax Can PPF Save You?
Assuming you invest ₹1.5 lakh in PPF and your marginal tax rate is 30% (income above ₹10 lakh under old regime):
- Tax saved on investment: ₹1,50,000 × 30% = ₹45,000 per year
- Additionally: Interest of ~₹10,650 (at 7.1%) is also tax-free, which would have been taxed at 30% = ₹3,195 extra saved
- Over 15 years: Assuming reinvestment, the total corpus at maturity is approximately ₹40.68 lakh — entirely tax-free
PPF Partial Withdrawal and Loan Rules
Partial Withdrawal
You can withdraw up to 50% of the balance at the end of 4th year (from the 7th financial year onwards). The amount is tax-free. You can make one withdrawal per year.
Loan Against PPF
From the 3rd to 6th financial year, you can take a loan of up to 25% of the balance at the end of the 2nd preceding year. The interest rate is 1% above the PPF rate.
PPF vs Other Tax-Saving Investments Under 80C
| Investment | Returns | Lock-in | Risk | Tax on Returns |
|---|---|---|---|---|
| PPF | 7.1% (guaranteed) | 15 years | None | Fully exempt (EEE) |
| ELSS Fund | 12-15% (market-linked) | 3 years | Market risk | LTCG above ₹1.25L taxed at 12.5% |
| NSC | 7.7% | 5 years | None | Interest taxable |
| Tax-Saving FD | 6.5-7.5% | 5 years | None | Interest taxable + TDS |
| NPS (Tier 1) | 8-12% (market-linked) | Till retirement | Low-Medium | 60% tax-free at withdrawal |
How to Open a PPF Account
- Where: Any nationalised bank (SBI, PNB, BoB etc.), select private banks (ICICI, Axis) or post offices
- Online: Most banks allow online PPF account opening via net banking or mobile app
- Documents needed: PAN card, Aadhaar, passport photo, address proof
- Minimum deposit: ₹500 per financial year (account becomes inactive if minimum not deposited)
- Maximum deposit: ₹1,50,000 per financial year
- Who can open: Resident Indian individuals (not HUF, not NRI)