What is PPF and how it works?

What is PPF and how it works?

What is (PPF) Public Provident Fund: PPF (Public Provident Fund) is a long-term investment scheme operated by the government. It is a tax-free savings scheme with a lock period of 15 years, and the interest will be set to the investment amount will be paid by the government at the quarter. An investor can invest in this savings scheme with a minimum of Rs 500/-. Also, this scheme helps in tax deduction under section 80 C Individuals can get exemption up to 1.5 lakh a year. Also, there will be tax exemption on the return amount on maturity.

PPF account can be opened either by the bank or by post-office, to gain tax-free income with the security offered by the government.

How does PPF Account Works

Follow the Steps to Open a PPF Account

PPF account can be opened both online and offline. If the investor wants to open the account online, must visit the official portal of the bank or post-office.

To open the account the individual must submit the following documents

  • KYC Documents (Aadhaar, Voter ID, Driver License, etc.)
  • Pan Card
  • Residential Proof
  • Form of Nominee declaration
  • Passport Sized Photos,

PPF Account Benefits

  • Tax Reduction
  • Security
  • Interest gain on the invested fund without any tax applied.

Essential features of PPF

  • Tenure
  • Investment Limits
  • Opening Balance
  • Deposit Frequency
  • Mode of Deposit
  • Nomination
  • Joint Accounts
  • Risk Factors

Account Maturity

  • The lock period of the PPF account is of 15 years
  • Once the proceeds reach maturity investor can either withdraw the amount and close the account or continue the account and continue further that is the account can be blocked for 5 years further.

Closure of account

  • If the investor wants to close the account investor has to visit the bank or post office the branch where the PPF account has been created.
  • The investor should give the written application along with the passbook and other requirements to close the PPF account and also to withdraw the proceeds.
  • After that, the bank or the post-office authority check the detail with the passbook and the lock-in period, if everything is okay they will close the account and the maturity proceeds will be credited to the bank account of the investor.

Block for 5 years to continue the PPF account

If the investor wishes to continue the account, the investor has to give the intimation to the bank or post office authority wherever the account has been opened to continue the account for 5 years. This has to be done within a year of maturity of the fund. Investors can operate this account further without any further contribution. In this way the investor can continue this procedure for every 5 years of the block, it will continue for the next five years of the block in this way the investor can gain interest on the investment proceed without tax till the account will be closed. Form the PPF account a person cannot try to pay off the debts that are the PPF account will not be attached to any such facilities, even the court cannot ask the person to clear the debt using the PPF accounts funds. Usually, the amount cannot be withdrawn before the lock period but one can withdraw after 7 years during the 15 years tenure of the account under certain terms and conditions.

How to Calculate PPF

By using the formula one can calculate the PPF. PPF Calculation Formula: F = P [({(1+i) ^n}-1)/i]

Where the variables represent – I-Rate of interest F-Maturity of PPF N-Total number of years P-Annual instalments

There are many online PPF Calculators available, from where anyone can calculate their PPF funds. For furthermore clearance about the PPF accounts and how does it work here are some examples of opening balance, closing account, withdraw of the proceeds and the interest of the the invested amount checks the below given picture for furthermore understanding about the PPF account.

PPF Calculation

PPF Account Summary

PPF account Maturity15 years
Premature withdrawalsAfter 5 years of opening date with 1% penalty of the amount
Further Lock PeriodBlock up to 5 years more after 15 years maturity completion.
Tax FreeYes
Loan AccessibilityYes, after 3 years of deposition
SecurityPPF is secure as it is operated by Government banks and post-offices.


What is the maturity or the lock-period of the PPF account?

15 years from the date of the PPF account opening.

Can the PPF account be continued after 15 years?

Yes, the investor can give the written application to block furthermore that is for 5 years.

When can we withdraw the PPF amount?

Usually after 15 years of maturity. But the partial amount can be withdrawn from the 7th year under some terms and conditions.

Can we get a loan against PPF Account?

Yes, a loan can be obtained from the 3rd financial year up to 5 years (Terms Apply).

Before the maturity can the PPF account be closed?

Yes, premature closure can be done after the completion of 5 years (Terms apply). But the investor must pay 1% of the balance amount as a penalty for premature closure.

Is PPF amount is Tax-free?

Yes, also the interest gained on PPF amount is also tax-free.