PPF real return is more than 7.1%: Here's the calculation most investors miss
Mint 53 min ago·1 Sept 2026, 9:00 am
The Public Provident Fund (PPF) is widely known for offering a fixed interest rate of 7.1% annually. However, for investors in the old tax regime, the effective return can be significantly higher. This is because the principal amount invested in a PPF qualifies for a deduction under Section 80C of the Income Tax Act. By saving tax on the invested capital, the actual cost of the investment decreases, which mathematically boosts the effective yield.
This tax benefit does not apply to those who have opted for the new tax regime, as the PPF deduction is not available there. Consequently, the effective return for new-regime taxpayers remains closer to the nominal 7.1% rate. For old-regime investors, the combined effect of the interest and the tax saving can push the effective annualised return to around 11%, making PPF a more attractive option than it appears at first glance.
Investors should assess their tax status carefully before deciding on their investment strategy. If you are in the old regime, the PPF remains a powerful tool for wealth creation with tax-free interest. Conversely, new-regime taxpayers might need to look at other tax-saving instruments to achieve similar benefits. Always review your tax filing options to maximise your returns.
Excerpt from Mint
PPF offers 7.1% interest, but eligible old-regime taxpayers may earn a higher effective return after factoring in the Section 80C tax benefit. Here’s how the tax saving can push the effective annualised return to around 11%, and why the benefit does not apply to every investor. PPF currently offers an interest rate of…Read the original at Mint
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