PPF Explained: How Your Maturity Amount Is Calculated

The Public Provident Fund (PPF) is one of the most popular long-term savings schemes in India, and for good reason: it is government-backed, the returns are completely tax-free, and it qualifies for a deduction under Section 80C. But many people are surprised by how large the final amount becomes. This guide explains exactly how PPF interest and maturity are calculated, with worked examples.

How PPF interest works

PPF interest is compounded annually. Each year, the interest you earn is added to your balance, and the next year’s interest is calculated on that larger balance. This “interest on interest” is what makes the fund grow faster and faster over time — the classic effect of compounding.

The interest rate is set by the government and reviewed every quarter. At present it is 7.1% per annum. Importantly, interest for each month is calculated on the lowest balance between the 5th and the last day of the month, so depositing before the 5th of the month earns you interest for that month.

A worked example

Suppose you deposit the maximum ₹1.5 lakh every year for the full 15-year term at 7.1%. Your total deposits are ₹1.5 lakh × 15 = ₹22.5 lakh. But the maturity value works out to roughly ₹40.68 lakh — meaning more than ₹18 lakh of that is pure interest, earned without you adding a single extra rupee.

That gap between what you put in and what you take out is the whole point of PPF. Because it compounds for at least 15 years, interest ends up making up a large share of the final corpus. Starting early and depositing the full limit each year makes the biggest difference.

Key rules to remember

• Minimum ₹500 and maximum ₹1.5 lakh can be deposited per financial year.
• The lock-in is 15 years, extendable in blocks of 5 years afterward.
• PPF is Exempt-Exempt-Exempt (EEE): deposits get an 80C deduction, and both the interest and the maturity amount are tax-free.
• Partial withdrawals and loans against the balance are allowed after a few years.

How much PPF grows in 15 years

The table below shows the maturity value after the full 15-year term at the current 7.1% rate, for different yearly deposits. Notice how, at the maximum, nearly half the final corpus is tax-free interest.

How to estimate your own maturity

The exact figure depends on your yearly deposit, the interest rate, and how long you stay invested. Rather than doing the compounding by hand, you can enter your numbers into our PPF Calculator, which applies the standard annual-compounding method and shows your invested amount, total interest, and final maturity value instantly.