The Public Provident Fund (PPF) is one of the most trusted savings schemes in India. It combines government backing, decent returns, and tax benefits, making it popular among salaried professionals, business owners, and even parents planning for their child’s future. However, despite being around for decades, there are still many myths and misconceptions about how PPF works. These misunderstandings often lead to confusion and poor investment decisions.
In this blog, let’s clear up the top 10 common misconceptions about PPF so that you can make the most out of your account.
Quick Overview of Popular PPF Misconceptions / Myths
| Misconception | The Reality |
|---|---|
| You can open multiple PPF accounts | Only one account per person is allowed |
| PPF is only for salaried employees | Any Indian resident can invest, including self-employed |
| Deposits can be made anytime, unlimited | Maximum 12 deposits per financial year |
| PPF has no lock-in | Lock-in is 15 years, with limited withdrawal options |
| NRIs can open accounts | NRIs cannot open new PPF accounts |
| Tax benefits apply beyond ₹1.5 lakh | Tax exemption under Section 80C is capped at ₹1.5 lakh |
| Interest rate is fixed | It is reviewed quarterly by the government |
| You can withdraw full money anytime | Full withdrawal only after maturity |
| Loan can be taken anytime | Loan facility is available only between 3rd and 6th year |
| PPF gives very high returns | Returns are moderate, not as high as equities |
Here are the 10 PPF misconceptions
1. You can open multiple PPF accounts
This is perhaps the most common misconception. Many people think they can open more than one PPF account to invest higher amounts.
The truth: You can have only one PPF account per individual. Even if you try to open another in a different bank or post office, it will be rejected. Joint accounts are also not permitted.
2. PPF is only for salaried employees
Some people assume that PPF is designed exclusively for those working in companies.
The truth: PPF is open to all Indian residents, whether salaried, self-employed, business owners, or students. Even minors can have accounts opened by their parents or guardians.
3. You can deposit anytime, in any number of instalments
A lot of investors believe they can deposit whenever they want, as many times as they like.
The truth: You can deposit either in lump sum or instalments. The maximum allowed is 12 deposits per financial year, within the ₹500–₹1.5 lakh annual limit.
4. PPF has no lock-in period
Some people treat PPF like a regular savings account, assuming money can be withdrawn anytime.
The truth: PPF has a 15-year lock-in period. Partial withdrawals are allowed only after the 7th financial year, and full withdrawal is possible only at maturity.
5. NRIs can open PPF accounts
Because many NRIs are familiar with PPF, they assume they can open accounts while living abroad.
The truth: NRIs cannot open new PPF accounts. If someone already has a PPF account and later becomes an NRI, they can continue it till maturity but cannot extend it further.
6. You can claim tax benefits beyond ₹1.5 lakh
Some investors mistakenly believe that because PPF is tax-free, there are no limits on deductions.
The truth: The tax deduction under Section 80C is capped at ₹1.5 lakh per year. Even if you deposit more than ₹1.5 lakh, you cannot claim extra tax benefits.
7. PPF interest rate is fixed forever
There is a misconception that once you open a PPF account, the interest rate remains the same for 15 years.
The truth: PPF interest rate is not fixed. It is reviewed and announced by the government every quarter. For example, it may change from 7.1% to 7.4% depending on the economy.
8. You can withdraw full money anytime
Some investors think PPF works like an FD, where you can withdraw with a penalty.
The truth: Full withdrawal is possible only at maturity (after 15 years). Premature closure is allowed after 5 years for specific reasons like medical treatment or higher education, but with a 1% interest penalty.
9. Loan can be taken anytime during the tenure
People often assume that a loan against PPF can be taken whenever needed.
The truth: Loan facility is available only between the 3rd and 6th financial year. The maximum loan amount is 25% of the balance at the end of the 2nd year before the loan year.
10. PPF gives very high returns
Some investors believe that since PPF is backed by the government and tax-free, it must give high returns.
The truth: PPF gives moderate returns (currently in the 7-8% range). While safer than equities, returns are lower. Its main advantage is safety, stability, and tax efficiency, not high returns.
FAQs on PPF Misconceptions
Q1. Is PPF better than FD?
PPF usually offers higher returns and tax-free maturity, while FDs are taxable. But FDs provide more liquidity.
Q2. Can I invest more than ₹1.5 lakh if I don’t need tax benefits?
No, the maximum deposit limit itself is ₹1.5 lakh, regardless of tax benefits.
Q3. Is PPF suitable for short-term savings?
No, PPF is for long-term wealth building due to its 15-year lock-in.
Q4. Can I transfer my PPF account from post office to bank?
Yes, transfers are allowed without affecting your balance or benefits.
Q5. Is the interest rate guaranteed?
The rate is guaranteed for that quarter but can change every 3 months.
The Public Provident Fund is one of the best instruments for safe, long-term savings in India. But to truly benefit, investors must separate facts from myths. Believing misconceptions like “multiple accounts are allowed” or “withdrawals are easy” can lead to financial missteps.
By understanding the real rules and limits, you can use PPF effectively for retirement planning, your child’s education, or simply building a tax-free safety net. PPF is not about chasing high returns – it’s about security, discipline, and steady growth.
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