A Public Provident Fund ( PPF ) or a PPF Account is a government-backed long-term savings scheme that offers attractive interest rates and tax benefits introduced in 1968 by the National Savings Organization for small investors to save money and earn guaranteed returns. It is among the most popular small savings schemes across different age groups.

Here are a few things you should know about a PPF account.

Age Limit: Any Indian citizen can open a PPF account with a bank or post office; however, one person can open only one account. There is no maximum age limit to open a PPF account or any restriction on account extension upon maturity. Furthermore, one can open this account for a minor child or someone of unsound mind. A PPF account is for 15 years; after that, it can be extended in blocks of five years. Upon maturity, one can retain the account indefinitely without making further deposits.  

Interest Rate: In the initial days of inception, 1968-69, the interest rate on PPF deposits was 4.8 per cent; currently, it is 7.1 per cent, which has remained constant since April 4, 2020. The Finance Ministry revises the interest rate periodically, which is compounded annually.

Tax Benefits: PPF depositors can claim tax benefits under Section 80C of the Income-tax Act, 1961. The interest earned is tax-free under Section 10 of the Act. The minimum deposit amount is Rs 500, and the maximum is Rs 1.5 lakh in a financial year.  

Loans and Partial Withdrawal: One can avail of loans against PPF within five years from the end of the initial subscription year. From the seventh year onwards, one can make partial withdrawals, subject to conditions such as there should not be any outstanding loan against PPF. The withdrawal amount should not be more than 50 per cent of the credit balance in the account at the end of the preceding year or the end of the fourth prior year, whichever is lower.

Premature Account Closure: A pre-mature closure is allowed only under certain conditions, like if the account holder or the family members suffer from a life-threatening disease and need money or for higher education of the accountholder or children, or change in the account holder’s residential status (non-resident Indian). For premature withdrawal, the account holder must submit Form 2; for early closure, they must file Form 5 along with necessary documents.

The PPF scheme introduced a change in November 2023 regarding the penalty for premature closure. As per the change, the interest credited to the account in case of early withdrawal will be 1 per cent less than the interest credited from the start of the current block of five years.