The headline rate understates it
PPF pays 7.1% per annum as of the July–September 2026 quarter, a rate unchanged since April 2020 and reviewed quarterly by the government.
Seven percent sounds unremarkable next to equity returns. But PPF carries EEE status — contributions, interest and maturity are all exempt from tax. Nothing is deducted at any stage.
That changes the comparison completely. For someone in the 30% bracket, a tax-free 7.1% is equivalent to roughly 10.1% before tax. Against a fixed deposit taxed at slab rate every year, PPF wins comfortably for higher-bracket taxpayers. The calculator shows this equivalence directly.
How the interest actually works
Interest is calculated on the lowest balance between the 5th and the last day of each month, then credited annually.
That produces a practical rule worth knowing: deposit before the 5th of the month, and ideally make the full year's contribution in early April. Depositing in March instead of April costs nearly a year of interest on that contribution. Over fifteen years the habit is worth a meaningful sum for zero extra money.
Limits, lock-in and access
Contributions run from ₹500 to ₹1.5 lakh per financial year. Exceeding the cap earns no interest on the excess.
The lock-in is 15 years, and it is genuinely long. Partial withdrawals become available from year seven, and loans against the balance from year three. At maturity the account can be extended in five-year blocks, with or without further contributions — extending without contributing is a quietly useful option, since the balance keeps compounding tax-free.
Where PPF fits
PPF is the debt portion of a long-term portfolio, not the whole portfolio. A guaranteed 7.1% tax-free is excellent for money that must not fall in value, and insufficient on its own for long-horizon wealth building, where equity has historically compounded faster.
Note also that the Section 80C deduction on contributions applies only under the old tax regime. Under the new regime you lose the deduction, but the EEE treatment of interest and maturity still holds — which keeps PPF attractive even without the upfront benefit.
Rates and rules are as of August 2026 and change. Verify current figures before acting, and confirm your tax position with a qualified professional.
Frequently asked questions
What is the current PPF interest rate?
7.1% per annum for the July-September 2026 quarter, unchanged since April 2020. The government reviews the rate quarterly.
How is PPF interest calculated?
On the lowest balance between the 5th and the last day of each month, credited annually. This is why depositing before the 5th matters, and why contributing in early April rather than March gains you almost a full year of interest.
Is PPF better than a fixed deposit?
For higher-bracket taxpayers, generally yes. PPF's 7.1% is entirely tax-free under EEE status, equivalent to roughly 10.1% pre-tax in the 30% bracket, while FD interest is taxed at slab rate every year. The trade-off is the 15-year lock-in.
What is the maximum PPF investment per year?
Rs 1.5 lakh per financial year, with a minimum of Rs 500. Amounts above the cap earn no interest, so there is no benefit to exceeding it.