New Delhi: The Public Provident Fund (PPF) is one of India’s oldest and most trusted small-savings instruments. Launched by the Ministry of Finance in 1968, it was designed to encourage household savings and offer a secure, long-term investment option with attractive tax incentives. Because it is fully backed by the Government of India, the PPF remains a low-risk haven even in volatile markets.
Currently, the scheme offers an interest rate of 7.1 percent per annum, compounded annually. The rate is reviewed every quarter by the Ministry of Finance, but once fixed, it does not change mid-quarter. Deposits made into a PPF account also qualify for deductions under Section 80C of the Income Tax Act, and the interest earned and maturity proceeds are tax-free under the Exempt-Exempt-Exempt (EEE) framework.
5 Lesser-Known Facts About the PPF
1. Lock-in Is Flexible Beyond 15 Years
The scheme’s tenure is officially 15 years, but unlike fixed deposits, it does not automatically end. You can extend your PPF account in blocks of five years indefinitely, with or without making further contributions. This feature makes it a powerful tool for building retirement savings.
2. Partial Withdrawals Allowed After 7 Years
Though the account has a lock-in, it isn’t fully inaccessible. Starting from the 7th year, an account holder can withdraw a limited percentage of the balance each year. This flexibility helps during emergencies without disturbing the entire corpus.
3. Loan Facility Against PPF
Before completing six years, you can borrow up to 25 percent of the balance available two years prior to the loan application date. This loan must be repaid within 36 months, and a nominal interest (1 percent above the PPF interest rate) is charged. This option can be cheaper than personal loans.
4. Immune from Attachment in Case of Debts
Funds held in a PPF account cannot be attached to repay debts or liabilities, as ruled by the Gujarat High Court. This gives depositors a unique layer of protection not found in most financial instruments.
5. Deposits Above Rs 1.5 Lakh Get No Benefits
You can deposit a minimum of Rs 500 per year and up to Rs 1.5 lakh per financial year. Contributions beyond Rs 1.5 lakh are permitted but will not earn interest or receive tax deductions. Therefore, it’s better to channel excess funds into other instruments.
Additional PPF Tips & Insights
Best Time to Deposit: For maximum interest accrual, deposit your contribution before the 5th of every month. Interest is calculated on the lowest balance between the 5th and the last day of the month.
Joint Accounts Not Allowed: PPF accounts can only be held individually, though parents can open accounts for minors.
Nomination Facility: You can nominate one or more people to receive the corpus in case of your demise.
Safe for Long-Term Goals: Because of its government backing and tax benefits, the PPF is widely used for retirement, children’s education, or marriage planning.
Online Management: Most banks and post offices now offer online access to PPF accounts, making it easier to view balances, make deposits, and download statements.
The Public Provident Fund remains one of the most effective tools for low-risk, tax-efficient wealth building in India. By understanding its hidden flexibilities—such as extensions beyond 15 years, partial withdrawals, and loan facilities—you can make the most of this scheme and align it with your long-term financial goals.
