In this guide
This guide explains what PPF is, how contributions and interest work, how maturity works, an illustrative example, and common mistakes. For a comparison with fixed deposits, see our separate PPF vs FD guide.
- What PPF is
- How contributions and interest grow the account
- How maturity and extension work
- An illustrative example
- Common mistakes
What PPF is
PPF is a small-savings scheme backed by the Government of India and available through post offices and authorised banks. It is designed for long-term saving: the money stays locked in for years, and the interest rate is set by the government rather than by the bank.
How contributions work
You deposit money into your PPF account during each financial year, either in one go or in several instalments, within the yearly minimum and maximum set by the scheme rules. Contributing every year keeps the account active.
Because contributions are flexible within those limits, you can match them to your cash flow — but the timing within the year affects how much interest each deposit earns.
How interest works
The Ministry of Finance notifies the PPF rate every quarter, so the rate can change over the life of your account. Interest is calculated monthly on the lowest balance between the 5th and the end of each month, and credited once a year at the end of the financial year.
Because credited interest stays in the account, it earns interest in later years — PPF compounds annually. Depositing before the 5th of a month (ideally early in the financial year) gives your money more months to earn.
How maturity works
A PPF account matures after 15 complete financial years from the end of the year in which it was opened. At maturity you can close it and withdraw the full balance, or extend it in blocks of 5 years, with or without fresh contributions.
Partial withdrawals and loans are allowed in some years before maturity under the scheme rules, but PPF is best treated as money you will not need for a long time.
An illustrative example
Suppose you deposit ₹1,00,000 at the start of every financial year for 15 years, and assume a constant hypothetical rate of 7% a year. That is ₹15,00,000 contributed, and the balance at maturity would be about ₹26,88,805 — roughly ₹11,88,805 of interest.
This is an illustration only. 7% is an assumption, not the current official PPF rate, and the real rate changes quarterly. Most of the interest comes in the later years, when the balance is largest.
Use the PPF Calculator to project your own yearly contribution and period. Its default rate is the latest notified rate it was configured with — edit it if a new rate applies.Open the PPF CalculatorImportant assumptions
Keep these in mind when reading any PPF projection.
- Calculators assume one contribution at the start of each year; real deposit timing changes the result.
- A single constant rate is assumed, while the actual rate is revised quarterly.
- Projections ignore partial withdrawals, loans and missed years.
- Results are estimates, not a guarantee of maturity value.
Common mistakes
Most of these are about timing, and are easy to avoid.
- Depositing after the 5th of the month and losing that month's interest.
- Leaving deposits until the end of the financial year.
- Missing the minimum yearly deposit, which can make the account inactive.
- Treating a projected maturity value as guaranteed when the rate can change.
- Using PPF for money needed within a few years.
Conclusion
PPF rewards steady, early and long-term contributions: annual interest compounds on a growing balance over at least 15 years. For shorter goals, a fixed deposit (try the FD Calculator) or a recurring deposit (try the RD Calculator) may fit better. Always check the current notified rate and scheme rules before deciding.