How PPF Works: A Step-by-Step Guide

Who can open a PPF account

Any resident Indian can open a PPF account in their own name. A parent or guardian can also open one for a minor child. Each person can hold only one PPF account, and joint accounts are not allowed.

The ₹1.5 lakh yearly limit covers your own account and any minor accounts you run as guardian together. Non-resident Indians cannot open a new PPF account, although an account opened while resident can usually continue to maturity.

How to open a PPF account

You can open a PPF account at any post office or at an authorised bank, including SBI and most other large public and private sector banks. Many banks let existing customers open one online through net banking in a few minutes.

You will usually need the account opening form, KYC documents (Aadhaar and PAN), a recent photograph, a nomination form, and an initial deposit of at least ₹500.

The life of a PPF account

Year 1: open the account and make your first deposit. The 15-year maturity clock starts at the end of this financial year.

Years 3 to 6: you can take a loan against your balance if you need cash.

After 5 full years: premature closure becomes possible, but only for specific reasons such as serious illness or higher education.

From year 7: you can make one partial withdrawal each year.

After 15 full years: the account matures. You can withdraw everything, keep it open without deposits, or extend it in 5-year blocks with deposits.

See exactly how your balance grows over this timeline with the PPF calculator, which shows a year-by-year table.

PPF vs bank fixed deposit

Interest rate: PPF pays 7.1% (set by the government and reviewed every quarter). An FD rate is set by the bank and locked in for the deposit term.

Lock-in: PPF runs for 15 years, with limited loans and withdrawals. FDs run from 7 days to 10 years and can usually be broken early for a small penalty.

Tax: PPF interest and maturity are tax-free. FD interest is added to your income and taxed at your slab rate, and banks may deduct TDS.

Safety: PPF is backed by the Government of India. Bank FDs are insured by DICGC up to ₹5 lakh per depositor per bank.

For long-term goals, PPF usually wins after tax. For money you may need within a few years, an FD is more flexible.

Common PPF mistakes to avoid

Missing the yearly minimum. If you skip the ₹500 minimum for a year, the account becomes inactive until you pay a penalty and the missed deposits.

Depositing after the 5th. Money paid after the 5th of a month earns no interest for that month.

Going over ₹1.5 lakh. Any amount above the yearly limit earns no interest and does not count for the tax deduction.

Forgetting the extension form. If you want to keep depositing after maturity, submit the form within one year of maturity.

Skipping the nominee. Add a nominee so your family can claim the balance easily.

Plan your PPF

Ready to see what your deposits will grow to? Use the free PPF calculator to compare 15 and 16 deposits, change the interest rate and test 5-year extensions.