Beginner guide · 6-minute read
PPF, explained simply
PPF (Public Provident Fund) is a savings account run by the Government of India. You put money in every year, it earns interest, and after 15 years you take it all out. You pay no tax on the interest or on the final amount.
Checked on 14 Oct 2026 against the Ministry of Finance small savings rate notice for Oct–Dec 2026.
In one minute
- Who runs it
- The Government of India, through post offices and some banks.
- What it pays
- 7.1% a year right now (Oct–Dec 2026). The government can change it every 3 months.
- How long
- 15 years. After that you can keep it going in blocks of 5 years.
- How much
- From ₹500 to ₹1,50,000 in each financial year (April to March).
How it works, with real numbers
Say you put in ₹1,50,000 every April for 15 years. That's ₹22,50,000 of your own money. At 7.1%, you would have about ₹40,68,209 at the end. The extra ₹18,18,209 is interest, and none of it is taxed.
Interest is added once a year, on 31 March. The next year you earn interest on that interest too. This is called compounding, and it's why the interest grows faster towards the end.
How the PPF rate has changed
PPF pays 7.1% today, unchanged since April 2020. Since it began in 1968, it has ranged from 4.8% (1968–1970) to 12% (1986–2000).
- A new rate applies to your whole balance from the quarter it starts. So over the years you earn whatever the line shows, not just today's 7.1%.
- Rates were higher in the 1980s and 1990s, when prices were also rising faster. What counts is how far the rate stays ahead of inflation (5.54% now).
See every rate change (27)
| Period | Rate a year |
|---|---|
| Apr 2020 – now | 7.1% |
| Jul 2019 – Mar 2020 | 7.9% |
| Oct 2018 – Jun 2019 | 8% |
| Jan 2018 – Sep 2018 | 7.6% |
| Jul 2017 – Dec 2017 | 7.8% |
| Apr 2017 – Jun 2017 | 7.9% |
| Oct 2016 – Mar 2017 | 8% |
| Apr 2016 – Sep 2016 | 8.1% |
| Apr 2013 – Mar 2016 | 8.7% |
| Apr 2012 – Mar 2013 | 8.8% |
| Dec 2011 – Mar 2012 | 8.6% |
| Mar 2003 – Nov 2011 | 8% |
| Mar 2002 – Feb 2003 | 9% |
| Mar 2001 – Feb 2002 | 9.5% |
| Jan 2000 – Feb 2001 | 11% |
| Apr 1986 – Jan 2000 | 12% |
| Apr 1985 – Mar 1986 | 10% |
| Apr 1984 – Mar 1985 | 9.5% |
| Apr 1983 – Mar 1984 | 9% |
| Apr 1981 – Mar 1983 | 8.5% |
| Apr 1980 – Mar 1981 | 8% |
| Apr 1977 – Mar 1980 | 7.5% |
| Aug 1974 – Mar 1977 | 7% |
| Apr 1974 – Jul 1974 | 5.8% |
| Apr 1973 – Mar 1974 | 5.3% |
| Apr 1970 – Mar 1973 | 5% |
| 1968 – Mar 1970 | 4.8% |
Source: National Savings Institute, Ministry of Finance, rates since launch; Oct–Dec 2026 from the Ministry's latest notice.
Pros and cons
Good things
- Very safe. It is backed by the Government of India.
- Tax-free. You pay no tax on the interest or on the final amount.
- Lowers your tax bill (old regime). Deposits up to ₹1.5 lakh a year can be deducted from your taxable income.
- Start small. ₹500 a year is enough to keep the account running.
- Pays more than many bank FDs today. 7.1%, against 6.05–6.4% on SBI fixed deposits.
- Builds a habit. The long lock-in stops you from spending the money.
Things to watch
- Locked for 15 years. You can take some money out only after 5 full years, and only up to a limit.
- Capped at ₹1.5 lakh a year. You can't put in more than that in one financial year.
- The rate can change. It's reviewed every 3 months and can go down as well as up.
- Small gain after inflation. With prices rising 5.54% a year, 7.1% grows what your money can buy by only about 1.48% a year.
- Late deposits earn less. Money paid after the 5th of a month earns no interest for that month.
- Deduction only in the old regime. Under the new regime you still get tax-free interest, but no deduction.
Is it right for you?
Mistakes to avoid
- Paying after the 5th. Interest for each month is counted on the lowest balance between the 5th and the month end. Paying ₹1,50,000 after 5 March each year instead of by 5 April leaves you ₹2,69,695 less after 15 years.
- Skipping a year. If you don't put in at least ₹500 in a financial year, the account becomes inactive. You can restart it by paying a small penalty plus the missed deposits.
- Using it as emergency money. The money is locked for years. Keep a few months of expenses somewhere you can reach quickly.
How to start
- Pick a post office or a bank that offers PPF. Many banks let you open one in their app.
- Keep your PAN and Aadhaar ready for KYC.
- Fill in the form and make your first deposit of ₹500 or more.
- Set a yearly reminder to deposit before 5 April.
Words you'll see
- Financial year
- 1 April to 31 March. The ₹1.5 lakh limit and ₹500 minimum apply to each financial year.
- Lock-in
- The time during which you can't take your money out.
- Maturity
- When the account completes its term and you can take everything out.
- Compounding
- Earning interest on interest you earned earlier.
- Old and new tax regime
- Two ways to work out income tax. Deductions like this one only work in the old regime.
This guide explains how things work. It is not advice on what you should invest in. NetReturns is not SEBI-registered.