PPF Calculator

What is the Public Provident Fund?

The Public Provident Fund (PPF) is a long-term savings instrument backed by the Government of India, introduced under the Public Provident Fund Act 1968. It occupies a unique position in Indian personal finance for three reasons: it carries sovereign guarantee (no credit risk), it has EEE (Exempt-Exempt-Exempt) tax status under the old regime, and the interest rate — while revised quarterly — has historically been maintained above the long-run inflation rate.

The EEE designation means the contribution (up to ₹1.5 lakh/year) qualifies for deduction under Section 80C, the interest credited annually is fully exempt under Section 10(11), and the maturity proceeds are tax-free. For a taxpayer in the 30% bracket, this combination means the effective pre-tax equivalent yield of a 7.1% PPF account is approximately 10.1% — significantly higher than taxable instruments like bank FDs.

How PPF interest is calculated

Interest is calculated monthly on the minimum balance between the 5th and the last day of each month, and is credited to the account on March 31 of each financial year. This is an important operational detail: contributions made before the 5th of a month earn interest for that month, while contributions made after the 5th earn interest only from the following month. Therefore, if you make a lumpsum annual contribution, depositing it between April 1 and April 5 (the first working days of the financial year) maximises the interest earned.

The calculator models annual compounding for simplicity — it applies the full annual interest rate to the opening balance plus the year's contribution. This slightly overstates returns compared to the monthly minimum-balance method, but the difference is small over typical horizons.

PPF contribution rules

• Minimum contribution: ₹500 per financial year. Failure to contribute in any year causes the account to become inactive (discontinued), and a ₹50 penalty per inactive year must be paid at reactivation.
• Maximum contribution: ₹1,50,000 per financial year. Amounts above this ceiling are returned without interest. This limit applies across the account holder's own PPF account and any minor child's account combined.
• Number of instalments: Contributions can be made in 1-12 instalments per year in any multiple of ₹50.

PPF loan facility

Between the 3rd and 6th financial year (starting from year 3, up to and including year 6), account holders can take a loan against their PPF balance. The loan amount is limited to 25% of the balance at the end of the 2nd year preceding the application year. The interest on the loan is 1% above the PPF interest rate, and the loan must be repaid within 36 months. This provides a source of emergency liquidity without breaking the long-term compounding.

PPF vs. ELSS: a comparison

Both PPF and ELSS (Equity Linked Savings Schemes) qualify for Section 80C deductions, but they differ fundamentally in risk, return potential, and liquidity:

• Risk: PPF has zero credit risk (sovereign guarantee) and zero market risk. ELSS invests in equity and has significant market risk.
• Return: PPF's current rate is 7.1% (post-tax equivalent ~10.1% for 30% bracket). ELSS historical CAGR has varied widely; illustrative long-run equity returns are often cited in the 10–14% range, but actual results depend on fund selection and market conditions — past performance does not guarantee future returns.
• Lock-in: PPF has a 15-year maturity (with partial withdrawals from year 7). ELSS has a 3-year lock-in per SIP instalment.
• Tax on maturity: PPF maturity is fully tax-free. ELSS redemption after 3 years attracts LTCG tax at 12.5% above the ₹1.25 lakh per FY exemption.

A common strategy is to use PPF for the guaranteed, tax-free, stable-return portion of the retirement corpus, while using ELSS or index funds for the growth-oriented, equity portion.

PPF in the new tax regime

Under the new tax regime (which became the default from FY 2023-24), the Section 80C deduction is not available. This reduces the PPF's tax advantage for those who opt for the new regime. However, the interest and maturity still remain fully tax-free. For a taxpayer who has switched to the new regime, the relevant comparison is the post-tax yield of PPF (7.1%, fully tax-free on returns) versus alternatives like bank FDs (which are taxable at slab rates).

This page is educational only and does not constitute investment or tax advice. The PPF interest rate is subject to quarterly revision by the Government of India and may change. The projections shown assume a constant rate and annual compounding, which may differ from actual PPF interest computation methodology. Consult a SEBI-registered adviser or qualified chartered accountant for personalised guidance.