What is PPF?
The Public Provident Fund (PPF) is a government-backed, long-term tax-free savings scheme in India. It carries a 15-year lock-in period, has interest compounded annually (7.1% as of recent quarters), and qualifies for tax deductions under the EEE (Exempt-Exempt-Exempt) framework.
The Public Provident Fund (PPF) was introduced by the National Savings Institute in 1968 to encourage small savings and provide retirement security. PPF accounts are highly secure because the interest and principal balances are guaranteed directly by the Government of India. PPF accounts can be opened at nationalized banks, select private banks, and post offices. The lock-in is 15 years, but you can extend it indefinitely in blocks of 5 years.
Formula
PPF interest is compounded annually. Interest is calculated on the minimum balance in the account between the 5th and the last day of each month, and credited at the end of the financial year.
Annual compounding, year by year:
Balance(y) = [Balance(y-1) + Deposit] × (1 + r) r = annual interest rate (decimal) repeat for tenure years
Worked Example
Worked Example Model:
- Yearly Deposit: ₹1,50,000
- Interest Rate: 7.1% p.a.
- Tenure: 15 Years
Steps:
- Interest is compounded annually at the end of each fiscal year (March 31).
- Assuming a deposit of ₹1,50,000 is made before April 5th every year to maximize interest accumulation.
- Year 1 balance: ₹1,50,000 * 1.071 = ₹1,60,650.
- Year 2 balance: (₹1,60,650 + ₹1,50,000) * 1.071 = ₹3,32,556.
- Repeat the annual balance updates compounding over 15 fiscal cycles.
Total Invested: ₹22,50,000. Interest Earned: ₹18,18,209. Maturity Amount: ₹40,68,209.
How to use this calculator
Input your planned annual deposit amount (minimum ₹500, maximum ₹1,500,000 per financial year), the current PPF interest rate, and the tenure in years (minimum 15). The calculator projects maturity balances.
Input your planned annual deposit amount (minimum ₹500, maximum ₹1,500,000 per financial year), the current PPF interest rate, and the tenure in years (minimum 15). The calculator projects maturity balances. **Important timing tip:** Deposit your yearly PPF contribution by the 5th of April each year. If making monthly deposits, make sure to pay by the 5th of each month. This ensures you earn interest for that entire month.