Why you should not immediately close a Public Provident Fund (PPF) account after 15 years

Even though a Public Provident Fund (PPF) account has a 15-year lock-in term, you shouldn't close it right away. It's a different matter if you require the lumpsum cash right away; otherwise, leaving it open may prove to be a really wise financial move.

Key reasons why you should not immediately close your PPF account after 15 years

⦁ The biggest advantage of a PPF account is its "Exempt-Exempt-Exempt"(EEE) status. This means your contributions, the interest you earn, and the final maturity amount are all completely tax-free.

⦁ When you extend your PPF account after 15 years, this EEE status continues. Your existing balance and any new contributions, and all of that interest will remain tax-free.

⦁ By not closing your account, you allow the power of compounding to continue working for you, potentially building a much larger retirement or long-term fund than you initially planned.

Choosing to extend your account provides you with the flexibility to keep your money growing without losing its tax-free status.

Full withdrawal and closure: You can take the entire amount and close the account.

Extension without contributions: Without making any additional deposits, you are able to extend the account in five-year increments. You will still receive tax-free interest on your current corpus.

Extension with contributions: You can keep making new deposits up to the 1.5 lakh annual cap while extending the account for five-year periods. Form H must be submitted within a year of the maturity of your account in order to do this.

Annual investment: ₹1.5 lakh (maximum allowed under PPF)

Investment duration: 25 years (15 years + two 5-year extensions)

Assumed interest rate: 7.10% per annum

According to the PPF calculator:

Total investment: ₹37.5 lakh

Interest earned: ₹65.58 lakh

Total maturity amount: ₹1.03 crore