PPF rules explained: Why your investment may stay locked in for more than 15 years

The Public Provident Fund (PPF) comes with a 15-year lock-in period, making it a popular choice for long-term savings. Backed by the government and offering assured returns, the scheme is often favoured by conservative investors who want to build a stable corpus while enjoying tax benefits under the EEE (exempt-exempt-exempt) regime.

However, many investors may be surprised to learn that the actual duration their money remains locked in can be slightly longer than 15 years, depending on when their PPF account is opened. Here's how it works.

What determines your actual lock-in period?

The 15-year tenure of a PPF account is not counted from the exact date you make your first investment, but from the end of the financial year in which the initial contribution is made. This means that if you invest at any time during the financial year, whether in April or March, the clock starts ticking only from 31 March of the year.

For example, if an individual opens a PPF account and makes their first deposit on 16 April 2026 (which falls in FY27), the 15-year tenure is calculated from 31 March 2027 (end of financial year 2027).

As a result, investors who open their accounts early in the financial year may effectively face a lock-in period of nearly 16 years, even though the scheme officially has a 15-year tenure.

When is the best time to deposit funds in PPF?

At present, the deposit rate is 7.10% per annum, which is reviewed by the government every quarter. The interest rate has remained unchanged since 1 April 2020. Apart from the 15-year lock-in period, investors have the option to extend their tenure in blocks of five years as many times as they want.

PPF allows deposits in instalments (up to 12 times in a financial year) or as a lump sum. While you can invest monthly, interest is calculated on the lowest balance between the 5th and the end of each month, so it is best to deposit before the 5th.

Since PPF falls under the EEE category, all contributions to the scheme are eligible for tax deduction under Section 80C of the Income Tax Act, up to ₹1.5 lakh in a financial year. Additionally, the interest earned is tax-free. Once you withdraw the funds, the maturity proceeds also enjoy the benefit of tax exemption.

Can you withdraw funds from your PPF account before maturity?

Investors can withdraw the full balance from their PPF accounts upon maturity after 15 years, in case they don't opt for an extension. However, the scheme also offers some liquidity before maturity. Under this provision, partial withdrawals are allowed after 5 years, allowing individuals to withdraw up to 50% of the balance, calculated based on either the end of the 4th year or the year immediately preceding the withdrawal.

Additionally, premature closure of a PPF account is also allowed under specific conditions, such as serious illness or higher education. If you don't want to touch your original investment and still need access to cash, there is an option to take a loan against your PPF contributions.

A loan against PPF funds is available after one year of opening the PPF account. The maximum loan amount that one can take is 25% of the available balance, according to ClearTax. Taking a second loan is also permitted, but only when the first loan is fully repaid. For loans against PPF, an interest rate of 1% applies if repaid within 36 months, and 6% thereafter.