PPF Calculator

Why a “boring” 7.1% is worth more than it looks

The Public Provident Fund pays a modest-sounding 7.1% a year, and every few months someone points out that equities have done better. What that comparison misses is what kind of 7.1% this is. PPF is backed by the Government of India — as close to zero default risk as a rupee investment gets — and it carries EEE tax status: the contribution is deductible under Section 80C, the interest is tax-free as it accrues, and the maturity amount is tax-free too. For someone in the 30% bracket, a tax-free 7.1% is roughly equivalent to a taxable fixed deposit paying about 10%, with none of the credit risk. That is the lens through which PPF should be judged: not against equity’s upside, but against other safe money.

What 15 years of the full limit builds

Take the calculator’s default: ₹1,50,000 a year — the annual maximum — for the full 15-year term at 7.1%, paid in monthly instalments. You contribute ₹22,50,000of your own money and finish with a maturity value of about ₹39,44,599, of which roughly ₹16,94,599 is tax-free interest— more than three-quarters of your total contributions, earned simply by leaving the money alone. The growth is back-loaded: the first year adds under ₹6,000 of interest, but because each year’s interest itself earns interest tax-free, the later years do the heavy lifting. That is compounding with the tax drag removed.

The rule that quietly costs people interest

PPF interest is calculated each month on the lowest balance between the 5th and the last day of the month. A deposit landing on or before the 5th earns that month’s interest; one made on the 6th effectively sits idle for a month. Over a lump-sum year the timing compounds into real money. In this calculator, switching the contribution mode from “yearly lump sum at the start of the year” to “yearly lump sum at the end” changes the 15-year maturity from about ₹40,68,209 to ₹37,98,514 — a gap of roughly ₹2,69,695 on identical contributions, decided purely by when in the year the money went in. If you invest a lump sum, do it in early April; if monthly, before the 5th.

The lock-in is firmer than a savings account, softer than you think

• Loans from year 3. Between the 3rd and 6th financial years you can borrow against the balance — useful liquidity without breaking the account.
• Partial withdrawals from year 7. After six complete years you may withdraw up to a capped share of the balance, once a year.
• Extension in 5-year blocks. At maturity you can extend indefinitely, with or without fresh deposits. Run the tenure out to 25 years at the same ₹1.5 lakh and the corpus reaches nearly ₹1 crore (~₹99,94,812) — the extension blocks are where PPF becomes a serious retirement asset.

Where PPF fits in a portfolio

PPF is the anchor for the safe, tax-free portion of a long-term plan — the money you never want to see fall. It pairs naturally with market-linked growth rather than competing with it: many investors run a PPF alongside equity SIPs, using PPF to lock in ₹1.5 lakh of Section 80C benefit and steady compounding while the SIPs chase higher long-run returns. To see the same tax-free compounding math on any rate or horizon, the compound interest calculator is a useful companion. One caveat worth remembering: the 80C deduction that makes PPF so efficient applies under the old tax regime — if you have moved to the new regime, you keep the tax-free interest and maturity but lose the up-front deduction, which shifts the comparison.