Public Provident Fund in Depth

Current PPF interest rate7.1%
Lock in period15 years
Minimum AccountRs. 500
Age Limit18- No Limit
Tax on PPF interestNil, tax exempted
PPF Account Overview

If you are working individual then you must be aware of what is Provident Fund Accounts. Many employers offer an EPF account for their employees to benefit the employee at the end of their career period. PPF stands for Public Provident Fund. It is a saving cum tax benefit scheme which is guaranteed by the Central Government of India. In this article, we will cover all the details of PPF like history, interest rate, PPF tax benefits, Eligibility and much more.

PPF Account

History of Public Provident Fund

PPF started in the year 1968, introduced by the National Savings Institute of the Ministry of Finance. This scheme was introduced to offer an investment plan that can save as well as provide an income tax benefit to the citizen.

Purpose of PPF

The Main aim of the PPF account is to provide security for the people on their old age. Many employers use this scheme to provide a secure future for their employees named as Employee Provident Fund (EPF). A PPF account can be opened by any Indian national above the age of 18 years. It is considered to be one of the oldest schemes that have been in used ever since its introduction. It is also one of the most successful schemes by the government of India to their Citizen.

Interest Rate on PPF Account

The interest rate on the PPF account is 7.1% w.e.f. April 1, 2021. The interest rate on this scheme is one of the highest interest rate provided by any other scheme.

Last 10 years interest rates in PPF

YearRate of Interest
From 1.4.1999 to 14.1.200012%
From 15.1.2000 to 28.2.200111%
From 1.3.2001 to 28.2.20029.5%
From 1.3.2002 to 28.2.20039%
From 1.3.2003 to 30.11.20118%
From 1.12.2011 to 31.3.20128.6%
From 1.4.2012 to 31.3.20138.8%
From 1.4.2013 to 31.3.20168.7%
From 1.4.2016 onwards8.1%

Historic Interest Rates

YearRate of Interest
From 1.4.1974 to 31.7.19745.8%
From 1.8.1974 to 31.3.19757%
  From 1.4.1986 to 31.3.1999  12%

How Interest is Calculated?

The minimum tenure to avail this scheme is 15 years. The interest will be calculated after the payment of the fee and is calculated in compound interest. Then for the second year, the interest rate will be calculated for the money deposited in the second year plus for the balance remaining in the account from the previous year. For Example- for the first year a payment of Rs.500 is made by Kapil then the interest rate of 8% is provided, the balance of 544 including the interest will be remaining. On the second year again Kapil deposited Rs.500, now the interest will be calculated on 500(deposit) + 544(balance in the account) =1044 of 8%=Rs. 1134. After 15 years, Kapil will get back Rs.15,586.

The number of Accounts Limits for PPF Account

An individual can open only one PPF account in his/her name, which can be opened in either post office or banks. The account holder at the time of account opening has to declare that he has only one PPF Account. If the individual opens a second PPF Account then the second account will be treated as invalid account and the interest will not be paid to the individual unless the individual gets an approval from Ministry of Finance for which he has to write to the Department of Economic Affairs.

PPF Deposit Frequency and Minimum Yearly Amount

A maximum number of 12 payments is allowed in the account for a one year and the minimum amount that can be deposited is Rs.500 and the maximum amount that can be deposited is Rs.1.5 lakhs. Amount exceeding Rs. 1.5 lakhs will not be included in the interest and will be returned to the individual without interest.

Ways to Deposit in PPF

PPF can be deposited both online as well as offline. You can deposit the money through net banking, branch visit where you have the account maintained. Below we have mentioned the method by which you can deposit the money-


If you choose to pay the fee online then you can use Net banking for this. However, there are only a few banks that allow their customer to transfer fund online for their PPF account. You can contact your bank to know whether they offer the PPF account or not. To deposit for the PPF account you have to do this in two steps

Add Beneficiary

  • Log in to your bank online net banking portal
  • On the profile tab, click on the “Add” link.
  • Provide the details of the PPF account -Name as Public Provident Fund, PPF account number, Your Address, and Inter Bank Transfer Limit.
  • Enter the IFSC Code of the bank Branch you have the PPF Account maintained with.
  • Accept the terms and conditions and confirm the process.

Fund Transfer

  • Click on Inter Bank Transfer link in payment/transfer tab
  • Select the transfer type as NEFT
  • Select the beneficiary from the list of Beneficiary displayed as PPF
  • Enter the Amount of money you want to transfer.
  • Accept any term and condition and confirm the process.
  • An OTP will be sent to your Register Mobile Number, enter the OTP to authorize the process.
  • The amount will be transferred to the beneficiary/receiver within 30 minutes.

Loan Against PPF Account

A loan can be easily availed against the PPF account between the third and sixth financial year. The loan amount that can be availed is 25% of the balance of the end of the second year. The loan amount can be paid off in a lump sum or in monthly installments within the 36 months time period. The interest rate that the loan amount will be recovered is 2% more than the interest earned. For Example- If you are getting 8% of interest on your yearly deposit then the interest that you have to pay will be 10%.

PPF Tax Exemption

PPF Account also provides tax exemptions as an added benefit when you avail the PPF Account. The tax benefit will be calculated on the all the PPF Account the family has. The maximum tax concession that you get will be capped at Rs.1.50 lakhs. The Tax deduction comes under the Income Tax Act, Section 80C.

Withdrawal in PPF Account

From the seventh year, your account will be eligible to withdraw the money partially. You can withdraw 50 % of the balance in the account. The funds withdrawn will not be taxed. To withdraw the money you have to fill the Form C with details like account number, amount of money etc.

Premature Closure of PPF Account

Premature Closure on the PPF Account will only be allowed from the 5th financial year and only in the case of life-threatening disease, child higher education. In this case, if the money is withdrawn partially then a penalty of 1% will be charged per year. For example, if the interest rate at the time of availing the PPF account is 8% then on partial withdrawal the interest rate will be reduced to 7%.

Banks Offering PPF Accounts

There are selected banks that offer the PPF account for their customers. these are the banks that offer a PPF account-

  1. ICICI Bank
  2. HDFC Bank
  3. Axis Bank
  4. State Bank of India
  5. Allahabad Bank
  6. Andhra Bank
  7. Bank of India
  8. Bank of Maharashtra
  9. Bank of Baroda
  10. Central Bank of India
  11. Canara Bank
  12. Indian Bank
  13. IDBI Bank
  14. Indian Overseas Bank
  15. Oriental Bank of Commerce
  16. Punjab National Bank
  17. Punjab and Sind Bank
  18. Union Bank of India
  19. UCO Bank
  20. United Bank of India
  21. Vijaya Bank

How to Transfer a PPF Account?

PPF Account is very flexible as you can easily transfer the account from post office to bank account and bank account to another bank account without any fee.  To transfer your PPF account you can easily follow these steps to transfer your PPF Account-

  1. Visit the bank/ Post office branch along with your PPF Passbook
  2. Submit the Transfer Request Form on which you have to mention the full address of the bank branch you want to transfer the Account. On submission, you will get a transfer request receipt
  3. The transfer process will begin after getting the request. The Existing bank branch will send all the details of your Account to the new branch.
  4. After receiving the document the new bank will contact you, you have to submit a new account opening form and old bank passbook.
  5. The verification process will be done with your valid IDs like Aadhar card, PAN Card etc.

The transfer process may take up to 1 month.

PPF Account Eligibility

DepositMinimum- Rs.500
Maximum-1.5 Lakhs
Age limitMinimum-18 years
Maximum- no limit
Lock in period15 years
PPF Account Eligibility

Pros of PPF Scheme

The following are the benefit of the Public Provident Fund Scheme

  • An Individual will get tax exemptions under this scheme
  • The returns are guaranteed by the government of India as it is controlled by the Central Government
  • Partial withdrawal and loans can be availed
  • Easy to open a PPF Account
  • This account is for everyone

Cons of PPF Account

The following are the disadvantages of the PPF Account

  • It cannot be opened by HUF, NRIs, and Trust etc.
  • The PPF account does not provide the best Liquidity to the money deposit.
  • It has a big lock-in period of 15 years.
  • There is a capping of Rs 1.5 lakh per annum on deposit of amount in a PPF account.
  • A PPF account cannot be closed prematurely except in case of death)
  • A joint account is not permissible as one individual can open a single account.

Similar and Alternate Schemes to PPF

PPF Account is the best account in terms of the return you get on your investment and the benefit you reap out of it. There is no match with any of the schemes provided as a saving tool. But there are still few Investment schemes that provide some similar benefits with such accounts like Sukanya Samriddhi Account (only for girl child), National Pension Scheme, National Savings Certificate (NSC) and Recurring Deposit with an interest rate of around 6% (vary from bank to bank).