The Public Provident Fund (PPF) is a government-backed scheme with a maturity period of 15 years, which you can extend. The interest rate is fixed for your tenure, and you can enjoy tax benefits.
PPF can be a reliable and tax-efficient option, and it can greatly influence your wealth over the long term, thanks to the compounding effect. In this article, you can understand the impact of PPF interest rates over time.
Public Provident Fund (PPF): A Quick Overview
| Deposit Amount | Maximum Deposit: ₹1.5 Lakh Minimum Deposit: ₹500 Flexibility to deposit any amount (in multiples of ₹50) whenever you want in a financial year |
| Account Maturity | On completion of 15 complete financial years from the end of the year in which you opened the account |
| Interest Rate | 7.1% (For 1st Apr’25 – 30th Sep’25) |
| Tax Benefit | Interest Earned: Tax-Free Under Section 10 of the Income Tax Act, 1961 Deposit Amount: Qualifies for deduction under Section 80C of the I-T Act. |
How PPF Rates Affect Your Corpus
Using a PPF calculator, we can compare how PPF interest rates impact different investment amounts:
| Yearly Investment Amount | Interest Rate | Total Investment Amount (After 15 Years) | Total Interest | Maturity Amount (After 15 Years) |
| ₹50,000 | 7.1% | ₹7,50,000 | ₹6,06,070 | ₹13,56,070 |
| ₹75,000 | 7.1% | ₹11,25,000 | ₹9,09,105 | ₹20,34,105 |
| ₹1,00,000 | 7.1% | ₹15,00,000 | ₹12,12,139 | ₹27,12,139 |
| ₹1,20,000 | 7.1% | ₹18,00,000 | ₹14,54,567 | ₹32,54,567 |
| ₹1,50,000 | 7.1% | ₹22,50,000 | ₹18,18,209 | ₹40,68,209 |
Observations
- Maturity amount grows nearly 1.8X of total investment
If you invest ₹7,50,000, the maturity amount is ₹13,56,070, which is approximately 1.8 times the deposit amount.
- Compound interest accelerates growth
The total interest earned grows faster due to compounding. By not touching your PPF investments, you can allow your wealth to grow exponentially.
- Scaling up contributions can increase returns
The PPF interest rate does not change. However, if you invest higher amounts, the gains will also be higher. For instance, if you’re investing ₹50,000, you are earning ₹6,06,070 as interest. But if you increase your yearly deposits to ₹75,000, you are earning ₹9,09,105 interest – a difference of nearly ₹3 Lakh.
Ways to Maximise Long-Term Wealth Using PPF
You can follow a few strategies to maximise your PPF wealth:
- Consider investing the maximum amount
The maximum you can deposit in PPF is ₹1.5 Lakh. To make use of compounding and tax benefits, consider investing the maximum amount. If you were to invest ₹1.5 Lakh until maturity, your total deposit amount would be ₹22.5 Lakh, and the maturity amount would be around ₹40 Lakh.
- Time your deposits carefully
PPF interest is calculated on the lowest balance between the 5th and the end of each month. If you’re making monthly contributions, make sure you deposit before the 5th of each month.
- Consider extension after maturity
After the initial 15-year maturity, you can extend your account in 5-year blocks. This way, you can continue investing, and your returns will continue to compound tax-free. This ultimately means a greater corpus.
- Align with long-term goals
The long maturity period of PPF, coupled with predictable returns and tax efficiency, means that you can use it to meet your long-term goals, such as retirement or your child’s education.
PPF Vs NPS: Which Is Better?
PPF and National Pension System (NPS) serve different purposes. However, they share several features such as long-term investments, government backing, tax benefits and low-cost investment. Therefore, you may be wondering whether you should choose one over the other.
Here, we break down the difference between PPF and NPS scheme details to help you make informed decisions:
| Feature | PPF | NPS |
| Purpose | General long-term savings | Primarily for retirement |
| Returns | Fixed, declared quarterly | Market-linked |
| Risk Level | Relatively low (government guaranteed) | Moderate to high (depends on asset mix) |
| Lock-in Period | 15 years (extendable in 5-year blocks) | Till age 60 (with partial withdrawals allowed) |
| Investment Limit | ₹1.5 Lakh/year | No upper limit (minimum ₹1,000/year for Tier 1 Account) |
| Taxation on Maturity | Fully tax-free (EEE) | Partially taxable: 60% lump sum tax-free, 40% for annuity (taxable) |
| Withdrawal Flexibility | After 15 years or partially after 7 years | Restricted until 60; partial withdrawal under conditions |
| Control Over Investment | Interest is fixed by the government | You can choose asset allocation |
For assured and tax-free returns, PPF may be suitable. However, if your goal is to build a significant retirement corpus, you may want to explore the NPS scheme details more deeply.
Smart Tip: Why not diversify? Let PPF offer tax-free returns while NPS serves as a retirement tool.
Bottom Line
When compared to market-linked instruments, PPF interest rates may seem modest. However, its tax efficiency, government backing and compounding returns make it a powerful investment vehicle. Note that no single investment can be enough for your financial future. Make sure you evaluate your financial goals, risk tolerance and investment horizon.