How to use the Complete Guide to PPF (Public Provident Fund)
Public Provident Fund (PPF) is a government-backed small savings scheme popular among Indian investors for its guaranteed returns and tax benefits. It is one of the few investment options that fall under the EEE (Exempt-Exempt-Exempt) category, making it an excellent tool for long-term retirement planning.
🏛️ Sovereign Guarantee
Since it is backed by the Central Government of India, your capital and interest are fully protected. It has practically zero risk of default.
💰 Triple Tax Benefit
1. Investment is deductible u/s 80C.
2. Interest earned every year is tax-free.
3. Maturity amount is fully tax-free.
The Formula
What Happens After 15 Years? (Maturity Options)
Once your PPF account matures after 15 years, you have three distinct options:
1. Withdraw Full Amount
Close the account and credit the entire maturity proceeds to your savings bank account. No tax to be paid.
2. Extend WITH Contribution (Best for Wealth)
Extend the account in blocks of 5 years. You can continue depositing money (up to ₹1.5L/year) and earning interest. You must submit a request form within 1 year of maturity.
3. Extend WITHOUT Contribution
If you do nothing, this is the default. Your existing balance continues to earn interest, but you cannot deposit fresh money. You can withdraw any amount from your balance once per financial year.
Premature Withdrawals & Loan Facilities
| Facility | Eligibility Timeline | Limit / Condition |
|---|---|---|
| Loan | 3rd to 6th Financial Year | Max 25% of balance at end of 2nd preceding year. Interest: 1% above PPF rate. |
| Partial Withdrawal | From 7th Financial Year | Max 50% of balance at end of 4th preceding year OR immediate preceding year (whichever is lower). |
| Premature Closure | After 5 Financial Years | Allowed only for medical emergencies or higher education. 1% interest penalty deducted. |