PPF

PPF is the bedrock of conservative saving for crores of Indian households. Backed by the Government of India, it offers safety, decent fixed returns and a rare triple tax exemption, making it the default debt allocation for many family portfolios.

How it works

You open a PPF account at a post office or most banks and contribute each year, subject to a minimum (₹500) and a yearly maximum prescribed by the government. The tenure is 15 years, and at maturity you can extend in blocks of five years, with or without fresh contributions. The interest rate is set by the government and revised quarterly, so it can change over the life of the account, but it is declared in advance and credited annually.

The big draw: EEE tax status

PPF enjoys Exempt-Exempt-Exempt treatment, the gold standard in Indian tax. Your contributions qualify for deduction under Section 80C (old regime), the interest earned is fully tax-free, and the maturity amount is tax-free too. Very few products offer all three, which is why PPF returns are best compared against *post-tax* returns of other instruments.

Liquidity and loans

PPF is illiquid by design, that is the point. Partial withdrawals are permitted only after a few years, and loans against the balance are available in the early period. A long lock-in protects you from your own impulses and lets compounding do its work over 15 years.

Why it matters and where it fits

For risk-averse savers, PPF is hard to beat: sovereign safety plus tax-free compounding. But it is a debt instrument, returns roughly track inflation and won't build serious wealth on their own. The smart use is as the safe, tax-free core of a portfolio, paired with equity (via index funds or NPS equity) for growth. Many parents also open one in a child's name early to capture the full 15-year cycle.