In this article
PPF is the most boring investment most families own, and that is its charm. A fixed lock-in, a government-set rate, no daily price to watch. What is less obvious is how the money builds: slowly at first, then suddenly.
How the balance builds up
This assumes ₹1.5 lakh deposited at the start of each year, interest compounding yearly at 7.1 percent. Real PPF interest is calculated monthly on the lowest balance between the 5th and month end, so deposit timing matters. The picture is close enough to see the shape.
The gap between the lines is interest. It is thin at year 3 and wide at year 15.
- Your deposits₹22.5 L
- Interest earned₹18.2 L
Interest is about 45 percent of the final amount.
Why the last years matter most
Interest is earned on the whole balance. In year 1 the balance is ₹1.5 lakh. In year 15 it is more than ₹36 lakh. The same 7.1 percent rate does very different work on the two.
Interest in year 15 is about 25 times that of year 1, from the same rate.
What if you stop at year 15?
At maturity you can withdraw everything, or extend in blocks of five years, with or without fresh deposits. If you extend, the balance keeps compounding. That is often where PPF turns from good to remarkable, because the interest each year is already larger than a full deposit.
- Cash in hand, tax-free
- Compounding stops
- Same 7.1% assumed
- Locked for 5 more years
₹40.68 lakh × 1.071⁵ ≈ ₹57.4 lakh. Rates and rules can change, so recheck before you rely on this.
Honest limits
- The yearly cap. You cannot put in more than ₹1.5 lakh a year, so PPF alone rarely builds a large corpus.
- Liquidity. Partial withdrawals are allowed only after year 7, with limits.
- Inflation. At 7.1 percent against 6 percent inflation your real gain is small. See what will ₹1 lakh buy in 2046.
- Rules change. Rate, cap and tax treatment are set by the government. Check the current scheme.
PPF works best as the steady part of a plan, next to something that can grow faster, such as a monthly SIP.
Questions people ask
How much will ₹1.5 lakh a year in PPF become in 15 years?
At an assumed 7.1 percent, about ₹40.7 lakh on a total deposit of ₹22.5 lakh. The actual rate is reset every quarter by the government.
Is PPF interest taxable?
Under the current rules the interest and the maturity amount are tax-free. Rules can change, so check the latest scheme.
What is the maximum I can invest in PPF in a year?
₹1.5 lakh across all your PPF deposits in a financial year.
Can I extend a PPF account after 15 years?
Yes, in blocks of five years, with or without further deposits. The balance continues to earn interest.
Why does PPF seem slow at first?
Interest is earned on the balance, and the balance is small early on. Most of the interest arrives in the last few years.