PPF Interest Rates and Rules Explained Simply

PPF looks simple, and mostly is. But two mechanical details decide how much you actually earn, and neither is obvious from the scheme description.

The rate, and who sets it

The Ministry of Finance notifies small savings rates quarterly. PPF has been at 7.1% per annum since April 2020 and remained unchanged for the July–September 2026 quarter — unusually stable, but reviewed four times a year nonetheless.

A nominal 7.1% understates the real position, because the return is tax-free. For someone in a higher slab, the equivalent taxable return would be meaningfully higher.

Detail one: the 5th of the month

Interest is calculated on the lowest balance between the 5th and the last day of each month.

So a deposit made on the 6th earns nothing for that month. Over fifteen years, consistently depositing after the 5th costs real money for no reason. If you invest annually, depositing before 5 April captures the full year.

Interest is compounded annually and credited at financial year end, so mid-year balances won't show it.

Detail two: the deposit limits

Minimum ₹500 per financial year — miss it and the account is treated as discontinued until revived. Maximum ₹1.5 lakh per financial year, which has been the limit for some years.

Exceeding the maximum doesn't earn extra interest on the excess.

Liquidity, such as it is

The lock-in runs fifteen financial years from the end of the year in which the account was opened — so an account opened mid-year matures slightly later than fifteen years from the deposit date.

Before then: loans are available in the earlier years, and partial withdrawals become permitted from the seventh financial year, subject to formula-based limits. Premature closure is allowed only in specified circumstances such as serious illness or higher education.

After fifteen years

You can withdraw everything tax-free, or extend in five-year blocks — with or without fresh contributions. The extension-without-contribution option lets an existing balance keep compounding tax-free, which some people use as a retirement income source. There's a form and a deadline for electing the with-contribution route, and missing it locks you into the other.

The regime caveat

The 80C deduction applies only under the old tax regime. Under the new regime, PPF still gives tax-free interest and maturity — but no deduction going in.

References

• Public Provident Fund: interest rate, tax benefits, withdrawal rules — ClearTax
• PPF interest rate for July–September 2026 — inkl
• PPF in 2026: key rules, interest rates and tax benefits — Angel One

This article is for general information only and is not financial or tax advice. PPF rates are notified quarterly by the Ministry of Finance and were current at the time of writing. Withdrawal and loan rules involve formula-based limits not fully described here — check the current scheme rules or consult your bank or post office.