The Current Interest Rate Remains Unchanged
For the quarter running from October 1, 2026, to December 31, 2026, the interest rate for the Public Provident Fund (PPF) has been kept unchanged at 7.1 percent per annum. This decision marks a period of stability for the popular government-backed savings
scheme. The interest is compounded annually and credited to the account at the end of the financial year. One of the most significant advantages of PPF is its Exempt-Exempt-Exempt (EEE) tax status. This means the contributions (up to ₹1.5 lakh per year) are eligible for tax deductions under Section 80C, the accumulated interest is tax-free, and the maturity amount is also fully exempt from tax.
Understanding the 15-Year Tenure
The PPF scheme comes with a mandatory lock-in period of 15 years. This tenure is calculated from the end of the financial year in which the initial deposit was made. So, if you open an account in October 2026, your 15-year period will begin from March 31, 2027. This long-term horizon is designed to encourage disciplined savings for major life goals like retirement or a child's higher education. The minimum annual investment required to keep the account active is just ₹500, while the maximum that can be deposited in a single financial year is ₹1.5 lakh.
Options for Extending Your Account
Once your PPF account completes its 15-year tenure, you are not forced to close it. You have the flexibility to extend it indefinitely in blocks of five years. There are two ways to do this. The first option is to extend the account with fresh contributions. In this case, you can continue to deposit money and claim tax benefits, but your withdrawal capacity during the extension is limited to 60% of the balance that was in the account at the start of the five-year block. The second option is to extend the account without making any further contributions. Your existing balance will continue to earn tax-free interest at the prevailing rate, and you can make one withdrawal of any amount per financial year.
Rules on Loans and Withdrawals
While PPF is a long-term product, it offers some liquidity. An account holder can take a loan against their PPF balance between the third and sixth financial years of the account's life. The loan amount is capped at 25% of the balance at the end of the second preceding year. Partial withdrawals are permitted from the seventh financial year onwards. The maximum amount you can withdraw is 50% of the account balance as it stood at the end of the fourth year preceding your withdrawal, or 50% of the balance at the end of the previous year, whichever is lower. Only one partial withdrawal is allowed per financial year.
Premature Closure: When Is It Allowed?
Under specific circumstances, the government allows for the premature closure of a PPF account after it has completed five full financial years. These grounds are typically serious, such as for covering costs related to a life-threatening illness of the account holder or their dependents, or for funding higher education. If an account is closed prematurely, a penalty is applied, and the interest paid on the account will be 1% lower than the rate that was applicable for the period the account was held.
