PPF Calculator Guide: Monthly Compounding & Returns (2026)

What is PPF?

The Public Provident Fund (PPF) is a government-backed long-term savings scheme, popular for its combination of safety, tax benefits, and compounding returns. It's one of the few investments in India that's fully EEE (Exempt-Exempt-Exempt) — your contribution, the interest earned, and the maturity amount are all tax-free.

🧮 Model Your PPF Returns on iCalcDesk

See how your savings compound year after year. Use the free iCalcDesk PPF Calculator to project your exact 15-year maturity value and tax-free interest earnings.

Key features

• Lock-in period: 15 years, extendable in blocks of 5 years
• Minimum investment: ₹500/year
• Maximum investment: ₹1,50,000/year
• Interest rate: Set quarterly by the government (check the current rate before investing — it changes)
• Interest calculation: Compounded annually, but calculated monthly on the lowest balance between the 5th and end of each month
• Tax benefit: Contributions qualify under Section 80C, up to ₹1,50,000/year. See our Income Tax guide for the full picture of 80C deductions alongside PPF.

How the math actually works

PPF interest isn't just "amount × rate" once a year. Interest is calculated every month on your lowest balance between the 5th and the last day of that month, then credited to your account at the end of the financial year.

This is why depositing before the 5th of the month matters — money deposited after the 5th doesn't earn interest for that month at all.

Formula (annual compounding)

A = P × [((1 + i)^n - 1) / i] × (1 + i)

Where:

• A = Maturity amount
• P = Annual investment
• i = Annual interest rate (as a decimal)
• n = Number of years

This assumes a fixed annual contribution made at the start of each year — actual returns vary slightly based on exactly when you deposit each month.

The "5th of the Month" Rule: How Much Does Depositing on the 6th Cost You?

One of the most overlooked rules in PPF investing is the deposit cutoff timing:

• The Rule: Under PPF scheme rules, interest is calculated on the lowest balance in your account between the close of the 5th day and the end of each calendar month.
• The Consequence: If your monthly contribution lands on or after the 6th, that deposit earns ₹0 interest for that entire month.

Compounding Loss Example: ₹12,500/Month Deposit

Suppose you invest the maximum ₹1.5 lakh annually as ₹12,500 monthly installments at 7.1% interest:

• Scenario A (Deposited on or before the 5th): Earns interest on the newly added ₹12,500 for all 12 months.
• Scenario B (Deposited on or after the 6th): Misses one month's interest on every single installment throughout the year.

💡 Actionable Rule: Always schedule your auto-debit or net-banking transfer for the 1st or 2nd of every month so funds clear well before the 5th cutoff.

Example

If you invest ₹1,50,000 every year for 15 years at an assumed 7.1% annual rate:

• Total invested: ₹22,50,000
• Approximate maturity value: ₹40,68,000+
• Tax-free interest earned: ₹18,18,000+

(Exact figures depend on the prevailing interest rate each quarter over the full 15 years — use the calculator above for a precise projection at current rates.)

PPF vs SIP — which should you choose?

PPF gives you guaranteed, tax-free returns at around 7–7.5%, making it ideal as the safe foundation of your portfolio. SIP in equity mutual funds historically delivers 10–15% over the long term, but with market-linked volatility. Most financial planners recommend both: PPF for the debt/safe portion, SIP for the growth portion.

PPF vs NPS for retirement

Both PPF and NPS offer 80C benefits, but they serve different purposes. NPS targets retirement specifically, offers an additional ₹50,000 deduction under 80CCD(1B), and has a market-linked equity component. PPF is fully debt, fully government-backed, and fully tax-free on maturity — including withdrawal. If retirement is your goal, both together often make more sense than either alone.

Should you extend beyond 15 years?

After the initial 15-year term, you have three choices:

1. Withdraw everything — account matures and you take the full tax-free amount
2. Extend without further contributions — the balance keeps earning interest, but you can't deposit more
3. Extend with contributions — continue depositing and get the same 80C benefit, in blocks of 5 years

Extending with contributions is usually the better move if you're still working and don't need the lump sum immediately, since the compounding keeps working in your favor tax-free.

Common mistakes

• Depositing late in the month — deposit before the 5th to not lose that month's interest
• Forgetting the ₹1,50,000 annual cap — any excess doesn't earn interest and isn't eligible for 80C
• Not extending in time — you must submit Form H within one year of maturity to extend with contributions; miss it and you can only extend without contributions
• Treating it as a short-term option — the 15-year lock-in makes PPF unsuitable for near-term goals

Frequently Asked Questions (FAQ)

Why must PPF deposits be made on or before the 5th of the month?

PPF interest is calculated monthly on the lowest balance between the close of the 5th day and the end of the month. Deposits made on or after the 6th do not earn any interest for that calendar month.

Can I extend my PPF account after the 15-year maturity period?

Yes. PPF can be extended indefinitely in 5-year blocks. To continue depositing and claiming Section 80C benefits, you must submit Form H within one year from the date of maturity.

Is the maturity amount from a PPF account taxable?

No. PPF operates under the Exempt-Exempt-Exempt (EEE) tax regime, meaning contributions qualify for Section 80C deductions, annual interest is tax-free, and the entire maturity proceeds are exempt from income tax.

What is the maximum annual deposit allowed in a PPF account?

The maximum deposit limit is ₹1,50,000 per financial year. Any excess amount deposited does not earn interest and is not eligible for Section 80C tax deductions.

Who should use PPF?

PPF works best for long-term, low-risk goals — retirement corpus building, a child's education fund 15+ years out, or simply as the safe, guaranteed-return portion of your overall portfolio alongside equity investments like SIPs.

Disclaimer: This article is for educational purposes only and does not constitute formal financial advice. PPF interest rates are subject to quarterly government revisions. Please check official notifications for current rates.