How this instrument works
The Public Provident Fund is a voluntary, government-backed savings account open to any Indian resident — salaried, self-employed, or not working at all — unlike the Employees' Provident Fund, which is a mandatory payroll deduction tied to a job. A saver chooses how much to put in, anywhere from ₹500 up to ₹150,000 in a financial year, and every rupee above that ceiling earns no interest and does not count toward the Section 80C deduction. The account is opened at a post office or a public-sector bank and carries a sovereign guarantee, so the return is the declared rate itself, not a market outcome.
The formula compounds annually rather than monthly because that is how PPF interest actually accrues: the Government of India resets the rate every quarter — 7.1% has held since 2020 — but interest is credited to the account only once a year, on 31 March. Treating each year's deposit as arriving on day one of the year, the source of the trailing (1+r) term, matches the standard PPF habit of depositing the full annual amount by 5 April. Interest is calculated on the lowest balance between the 5th and the last day of each month, so a lump sum deposited in early April earns a full year of interest while the same amount deposited in March earns almost none.
Two things the sheet cannot show. It assumes every year's contribution lands on time and at the same size, when a real saver's deposits are often irregular, and the 15-year account can be extended afterward in blocks of five years — Investment period, years covers one continuous run, not an extension chosen later. And because both the deposit and the interest are exempt from tax at every stage under India's EEE treatment, Maturity value, ₹ is also the amount a saver actually keeps, which is not true of a bank fixed deposit or the market-linked National Pension Scheme, where tax or market risk can shrink what compounding appears to promise.
- Enter Annual contribution, ₹ — the scheme caps contributions at ₹150,000 a year; anything above that earns no interest.
- Set PPF annual interest rate, % to the rate the government currently has declared — 7.1% is the rate in force as of this writing.
- Set Investment period, years to how long the account will run; 15 years is the standard lock-in before any extension.
- Read Maturity value, ₹ for the compounded total the account reaches at the end of that period.
Worked example — ₹1.5 lakh a year for 15 years
Set Annual contribution, ₹ to 150,000 — the statutory maximum — PPF annual interest rate, % to 7.1, and Investment period, years to 15, the base lock-in with no extension. Maturity value, ₹ comes out to ₹40,68,209.22: fifteen deposits of ₹1.5 lakh each compounding annually at 7.1%, every one treated as if it landed on the first day of its year.
Because the formula is linear in the contribution, halving the annual deposit to ₹75,000 over the same 15 years exactly halves the result, to ₹20,34,104.61 — a useful way to sanity-check any figure this sheet returns. Extending the same ₹1.5 lakh contribution through two further five-year blocks, to 25 years total, more than doubles it instead, to ₹1,03,08,014.97 — compounding does most of its work in an account's later years, not its earlier ones, which is the strongest argument for extending rather than closing the account at year 15.
Questions
Why does PPF compound annually instead of monthly like EPF?
Because that is how the scheme actually credits interest: PPF interest is worked out each month on the lowest balance between the 5th and the last day of that month, but it is credited to the account only once a year, on 31 March. EPF, by contrast, compounds the mandatory employer-and-employee contribution monthly. Depositing the full Annual contribution, ₹ by 5 April captures a full year of interest on it; the same deposit made in February earns almost nothing that financial year.
Who actually opens a PPF account instead of relying on EPF?
Mostly people EPF does not cover. The self-employed, freelancers, and gig workers have no employer to match a contribution, so PPF is often their only government-backed, tax-free retirement option. Salaried savers already inside EPF also use PPF to save beyond EPF's employer-linked structure, and parents commonly open one in a minor child's name to build a fund the child cannot touch until adulthood.
What happens if I contribute more than ₹150,000 in a financial year?
The excess earns no interest and is not counted toward the Section 80C deduction — most providers simply refuse a deposit that would push the year's total past ₹150,000. If a lump sum and a separate standing instruction accidentally combine to exceed it, the amount beyond the cap sits uncompounded until it is refunded, so Maturity value, ₹ should only be checked against contributions at or below the limit.
Can I take money out before the 15-year term ends?
Partially, and only after the account turns seven years old: one withdrawal a year is allowed, capped at 50% of the balance at the end of the fourth preceding year or the immediately preceding year, whichever is lower. Full withdrawal without penalty arrives only at maturity, or at the end of any five-year extension block chosen afterward, which is why Investment period, years should reflect a term you can actually commit to.
What does PPF's EEE tax treatment mean for the maturity value shown here?
It means Maturity value, ₹ is also the amount you keep. Under India's exempt-exempt-exempt rule, Annual contribution, ₹ is deductible under Section 80C up to the yearly cap, the interest that accrues every year is not taxed, and the lump sum at maturity is not taxed either. A bank fixed deposit of the same size loses part of its stated return to tax on interest each year, so its after-tax growth trails a PPF account earning the identical rate.
How is this different from an NPS or ELSS projection?
NPS invests contributions in market-linked equity and debt funds, so its return is a projection built on an assumed rate rather than a rate the government has actually declared, and part of the payout at retirement must buy an annuity. ELSS is an equity mutual fund with a 3-year lock-in whose real return is the market's, not a fixed percentage. PPF is the one of the three where PPF annual interest rate, % is a real government-set number and Maturity value, ₹ is not a market forecast.
References
- National Savings Institute, Ministry of Finance — Public Provident Fund
- Consumer Financial Protection Bureau — Planning for retirement
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.