New Delhi: The Indian government today confirmed the Public Provident Fund (PPF) interest rate will remain unchanged at 7.1 percent for the January-March 2026 quarter. This marks the seventh consecutive quarter that the popular small savings scheme has maintained its current rate. The Ministry of Finance announced the decision on December 31, 2025, providing continuity for millions of savers.[upstox+5]
Stability for Savers
The consistent 7.1 percent interest rate offers a sense of stability for long-term investors, particularly those seeking secure, government-backed returns. This decision comes despite some market indicators, such as lower inflation and government bond yields, that might have otherwise suggested a rate cut. The government's choice to keep rates steady aims to support small savers and retirees who rely on these schemes for fixed income.[m+2]
Deepak Aggarwal, a chartered accountant and Delhi-based wealth advisor, noted that investing a portion of a portfolio in fixed income instruments is advisable for long-term wealth creation.This highlights the importance of schemes like PPF in a diversified financial plan. The PPF rate has held firm since April 1, 2020, offering predictability in an often volatile financial landscape.[obnews+5]
How PPF Rates Are Determined
The government determines PPF interest rates quarterly, typically based on recommendations from the Shyamala Gopinath Committee. These guidelines suggest linking the rate to the average secondary market yield on 10-year government securities (G-Secs) from the previous quarter, plus a spread of 25 basis points.[upstox+2]
However, the government does not always strictly follow these recommendations. For instance, the average yield on 10-year G-Secs was between 6.32 percent and 6.54 percent during the July-September quarter of 2025. Applying the committee's formula would have resulted in a new PPF rate between 6.57 percent and 6.79 percent, which is lower than the current 7.1 percent.This shows the government has prioritized stability and investor confidence over a strict adherence to the formula. Chakravarthy V, co-founder and Director, Prime Wealth Finserv, explained that the PPF rate has consistently been priced above the formula-implied rate to preserve its attractiveness as a long-term savings instrument.[upstox+2]
A Look at PPF's History
The Public Provident Fund scheme began in 1968 with a modest interest rate of 4.8 percent.Over the years, it saw significant fluctuations. The "golden era" for PPF investors was between 1986 and 2000, when the interest rate reached a high of 12 percent.[holisticinvestment+5]
After this peak, rates gradually declined. By 2001, the rate was cut to 9.5 percent, and by 2003, it further reduced to 8 percent.The rates remained around 8 percent until 2011, seeing some revisions before settling at 7.1 percent since April 2020.This long period of consistency at 7.1 percent makes the current decision particularly noteworthy. The government reviews and notifies interest rates on small savings schemes every quarter.[holisticinvestment+8]
PPF's Enduring Appeal and Benefits
PPF remains a highly popular investment option in India due to its safety, tax benefits, and government backing. Individuals who are residents of India can open a PPF account.The scheme has a lock-in period of 15 years, encouraging disciplined long-term saving.Investors can extend the account in blocks of five years after maturity.[en+5]
A key advantage of PPF is its Exempt-Exempt-Exempt (EEE) tax status under the old tax regime. This means deposits up to ₹1.5 lakh per year are eligible for tax deduction under Section 80C of the Income Tax Act. The interest earned and the final maturity amount are completely tax-free under both the old and new tax regimes. This makes PPF a compelling choice for individuals looking to build a tax-efficient retirement fund or save for other major life goals like a child's education.[upstox+4]
Investors can deposit a minimum of ₹500 and a maximum of ₹1.5 lakh per annum into their PPF account. Interest is compounded annually but calculated monthly on the lowest balance between the 5th and the last day of each month. This encourages investors to make deposits before the 5th of each month to maximize their returns.[empree+10]
Comparison with Other Small Savings Schemes[jainam]
Along with the PPF, the Ministry of Finance also announced unchanged interest rates for other small savings schemes for the January-March 2026 quarter. The Senior Citizen Savings Scheme (SCSS) and the Sukanya Samriddhi Yojana (SSY) continue to offer the highest returns at 8.2 percent.
Other rates include:[m+5]
- National Savings Certificate (NSC): 7.7 percent.
- Kisan Vikas Patra (KVP): 7.5 percent, with investments maturing in 115 months.
- Post Office Monthly Income Scheme (POMIS): 7.4 percent.
- Post Office Savings Deposit: 4 percent.
- Three-year Post Office Term Deposit: 7.1 percent.
Whencompared to bank fixed deposits (FDs), small savings schemes often offer competitive or higher interest rates. Many FDs typically provide interest rates around 6-6.5 percent per annum, while schemes like PPF offer more than 7 percent. The tax-free nature of PPF interest further enhances its attractiveness compared to FDs, where interest income is generally taxable.[timesofindia+3]
The government's decision to maintain the Public Provident Fund interest rate at 7.1 percent for the upcoming quarter provides welcome consistency for millions of Indian savers. This stability, coupled with the scheme's attractive tax benefits and government backing, ensures PPF remains a cornerstone for long-term financial planning.[obnews+1]
