PPF remains one of the most reliable long-term savings instruments in India, but its rules around contributions, withdrawal, and extension trip up more people than you'd expect.
The basics
You can contribute between ₹500 and ₹1,50,000 per financial year, earning a government-set interest rate (currently 7.1%, revised quarterly) that compounds annually on your account's yearly closing balance. The account has a 15-year lock-in from the date of opening.
Partial withdrawal rules
You can make one partial withdrawal per year starting from the 7th financial year, up to a limit based on your balance a few years prior. This isn't unlimited access — it's designed as a genuine long-term instrument, not a flexible savings account.
What happens after 15 years
At maturity, you have three choices: withdraw the full amount (tax-free), extend the account for another 5 years with continued contributions, or extend without making further contributions while the existing balance keeps earning interest. Many people don't realize the third option exists and either withdraw unnecessarily or feel locked into contributing further.
Why PPF's EEE status matters
Contributions qualify for Section 80C deduction (within the overall ₹1.5 lakh limit, shared with other 80C investments), the interest earned is entirely tax-free, and the maturity amount is also tax-free — a genuinely rare combination that makes PPF's effective after-tax return often more competitive than it first appears compared to a similarly-rated but taxable fixed deposit.
A common mistake: depositing late in the financial year
PPF interest is calculated on the lowest balance between the 5th and last day of each month. Depositing after the 5th of a month means you lose that month's interest on the new deposit — a small but avoidable loss if you simply deposit before the 5th instead, especially for lump-sum yearly contributions.