How is Public Provident Fund (PPF) taxed in the new tax regime?

Public Provident Fund (PPF) is popular for being completely tax-free. However, this is not the case for taxpayers filing their returns under the new tax regime. There is a slight difference compared to the old tax regime.

In contrast, the old tax regime allows section 80C deduction against the amount invested in a PPF account. Under this section, one can claim a combined deduction of up to ₹1.5 lakh against investments in various tax-saving schemes. Furthermore, similar to the new regime, the interest earned and the amount withdrawn on maturity are also tax-free in the old regime.

Is PPF relevant in the new tax regime?

PPF is more than just a tax-saving scheme. It is a long-term investment and savings instrument that offers guaranteed returns and freedom from taxes on the amount withdrawn at maturity.

PPF is one of the few savings schemes on which there is no tax on maturity amount under both the old and new tax regimes, which makes the effective returns from investments much higher than the nominal interest rate offered by the scheme.

So when it comes to relevance, PPF remains relevant even in the new tax regime.

However, whether one should invest in PPF scheme or not is an individual's call, depending on his/her financial goals.