If you are new to the world of investing, you may have heard about the Public Provident Fund (PPF) account. It is a popular investment option in India that offers attractive returns and tax benefits. In this beginner’s guide, we will explain what a PPF account is, how to open one, and the key things you need to know before investing in it.

What is a PPF account?

A PPF account is a long-term savings scheme offered by the Government of India. It is an ideal investment option for individuals who want to build a retirement corpus or save for their children’s education. The PPF scheme is backed by the government and is considered a safe investment avenue. The interest earned on a PPF account is tax-free, and the scheme offers tax benefits under Section 80C of the Income Tax Act.

How to open a PPF account?

Opening a PPF account is a simple and straightforward process. You can open a PPF account either at a designated post office or a nationalized bank. To open a PPF account, you will need to fill out the application form, provide the necessary documents such as proof of identity, address, and photographs, and deposit a minimum amount of Rs. 500. Once your application is processed and approved, you will be provided with a PPF account number, and you can start investing.

Key features of a PPF account

Before investing in a PPF account, it is essential to understand its key features:

  • Lock-in period: A PPF account has a lock-in period of 15 years. This means that you cannot withdraw the entire amount before the completion of 15 years. However, partial withdrawals are allowed from the 7th year onwards.
  • Interest rate: The interest rate on a PPF account is set by the government and is subject to change every quarter. Currently, the interest rate is 7.1% per annum. The interest is compounded annually, and it is added to the account balance at the end of each financial year.
  • Investment limit: The minimum investment amount in a PPF account is Rs. 500 per year, and the maximum investment limit is Rs. 1.5 lakh per year. It is important to note that you can make either a lump sum deposit or spread your investments throughout the year.
  • Tax benefits: Investments in a PPF account are eligible for tax benefits under Section 80C of the Income Tax Act. The amount invested, as well as the interest earned, is exempt from tax. However, it is important to note that the principal amount cannot be withdrawn before the completion of the lock-in period.

Benefits of investing in a PPF account

Investing in a PPF account offers several benefits:

  • Attractive returns: PPF accounts offer attractive returns compared to other fixed income options such as fixed deposits. The compounding effect over the long term can significantly increase your investment.
  • Tax benefits: As mentioned earlier, PPF investments qualify for tax benefits under Section 80C of the Income Tax Act. This can help you save on taxes and increase your overall savings.
  • Safe investment: PPF accounts are backed by the government, making them a safe investment option. The guaranteed returns and tax benefits make it an ideal choice for risk-averse investors.
  • Long-term wealth creation: The long lock-in period of 15 years encourages disciplined investing and helps in building a substantial corpus over time. It is an excellent investment avenue for long-term financial goals.

Things to consider before investing in a PPF account

While a PPF account is a popular investment option, there are a few things you need to consider before investing:

  • Long lock-in period: The 15-year lock-in period may not be suitable for individuals looking for short-term liquidity. Ensure that you have sufficient funds for emergencies and do not solely rely on the PPF account for short-term financial needs.
  • Rate of return: While PPF offers attractive returns, it is important to compare it with other investment options to make an informed decision. Consider your risk appetite, investment goals, and the prevailing interest rates before investing.
  • Withdrawal restrictions: Although partial withdrawals are allowed from the 7th year, it is advisable to have a clear understanding of the withdrawal rules and the impact on your long-term financial goals.


A PPF account is a great investment option for individuals who want to build long-term wealth and enjoy tax benefits. It provides a safe and guaranteed return on investment, making it suitable for risk-averse investors. However, it is important to consider the lock-in period, rate of return, and withdrawal restrictions before investing in a PPF account. It is always advisable to consult with a financial advisor to understand how a PPF account fits into your overall investment portfolio.