The Public Provident Fund (PPF) is one of India's most trusted long-term savings instruments. It offers a government-guaranteed interest rate, tax-free returns under the EEE (Exempt-Exempt-Exempt) regime, and a 15-year lock-in that forces disciplined saving. But how do you calculate the maturity value? The answer lies in understanding how PPF interest is computed and how annual contributions compound over time.
This guide explains the PPF calculation method, interest rules, extension options, and worked examples. Use our PPF Calculator to compute your maturity value instantly.
PPF interest is not calculated as a simple lump at the end. It is computed monthly on the lowest balance between the 5th and the end of each month, then credited annually at the end of the financial year (31 March). This timing rule is crucial:
For investors who deposit a lump sum each year, depositing before 5 April maximises interest for the full year.
PPF is a recurring annual investment. If you invest a fixed amount A each year at the start of the year for 15 years at rate r, the maturity value is:
M = A × [(1 + r)^15 − 1] / r × (1 + r)
This is the future value of an annuity due (payments at the start of each period). For r = 7.1% = 0.071:
So every Rs 1 invested annually grows to about Rs 25.74 at maturity.
This is fully tax-free. For someone in the 30% bracket, a comparable taxable investment would need to yield around 10.14% to match this.
Even a modest annual contribution more than doubles your money over 15 years.
If you spread Rs 1,50,000 across 12 monthly deposits of Rs 12,500 before the 5th of each month, the returns are slightly higher because each deposit starts earning interest sooner. The approximate maturity works out to around Rs 39.5 lakh, compared to Rs 38.61 lakh for a single annual lump sum — a difference of about Rs 89,000 from monthly compounding alone.
The 15-year lock-in is only the beginning. After maturity, you have three options:
Close the account and withdraw the entire balance tax-free.
Keep the balance earning interest without adding new deposits. You can extend in 5-year blocks indefinitely. You can make one withdrawal per year, up to 60% of the balance at the start of the extension block.
Continue contributing up to Rs 1.5 lakh/year for another 5-year block. Submit Form H within one year of maturity. This maximises compounding.
After 15 years, your balance is Rs 38.61 lakh. You extend for 5 more years, contributing Rs 1.5 lakh annually at 7.1%:
You can take a loan against your PPF balance from the 3rd to the 6th financial year. The loan amount is up to 25% of the balance at the end of the 2nd preceding year. The loan must be repaid within 36 months at 1% above PPF rate.
The PPF interest rate is set by the government each quarter. It has recently been around 7.1% per annum, compounded annually. The rate is subject to revision every quarter.
After the 15-year lock-in, you can withdraw the full balance, extend the account in 5-year blocks with or without contributions, or make partial withdrawals. The account does not close automatically.
PPF interest is calculated monthly on the lowest balance between the 5th and last day of the month, and credited annually at the end of the financial year. Deposits made before the 5th earn interest that month.
PPF is a powerful blend of safety, tax savings, and compounding. The key to maximising returns is consistent annual contributions, depositing early in the financial year, and extending the account beyond 15 years. Use our PPF Calculator to plan your contributions and pair it with the Compound Interest Calculator and Income Tax Calculator for a complete view of your savings.
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