Public Provident Fund | New PPF Rules | Premature Closure of PPF Account

Public Provident Fund | New PPF Rules | Premature Closure of PPF Account

The Public Provident Fund (PPF) is one of the most preferred tax savings instruments in India. PPF scheme provides various benefits such as risk-free investment, savings on income tax, tax-free attractive interest rate on investments, PPF account cannot be attached under any decree or court order. As per recent notification dated February 13, 2018, Finance ministry has proposed certain new benefits for PPF scheme apart from ensuring the existing benefits of PPF scheme.

Public Provident Fund (PPF)

At present, there are various acts for Small Saving Schemes. Now the Government has proposed to merge Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873. With a single act, relevant provisions of NSC and PPF would be subsumed in the new amended Act without compromising on any of the functional provision of the existing Acts.

Also read: National Saving Certificate (NSC)

Public Provident Fund | New PPF Rules

In the recent notification, the Ministry of Finance stated that all existing benefits available to the investors have been retained while consolidating PPF Act under the proposed Government Savings Promotion Act. This means existing benefits available to depositors under existing PPF Act would not be taken away through this process or amendment. The primary objective in proposing this common Act is to make rules easier for the depositors and also to add certain flexibilities for the investors.

Also read: All about ELSS | Tax Saving Mutual Funds

New PPF Rules | Premature Closure of PPF Account

Apart from all existing PPF benefits, following new benefits for PPF account holders have been proposed under the bill.

1. As per the existing PPF Act, the PPF account can’t be closed prematurely before completion of five financial years. If the PPF account holder wants to close his/her PPF account before five years in exigencies, he/she can’t close the account. The premature closure of PPF account may now be permitted to deal with medical emergencies, higher education etc.

2.  The PPF account opened by guardian on behalf of a minor(s) under the provisions made in the proposed bill guardian may also be given associated rights and responsibilities.

3. There was no clear provision earlier regarding deposit by minors in the existing Acts. The provision has been made now to promote the habit of savings among children.

4. There are no clear provisions in the present PPF Act for the operation of an account in the name of physically infirm and differently abled persons. Provisions in the new Act have been made in this regard.

5. As per current provisions of PPF Act, if the PPF account holder dies and nomination exists, the balance amount will be paid to the nominees. Whereas, Hon’ble Supreme Court in its judgment stated that nominees are mere Trustees for the benefit of legal heirs. It was creating disputes between the provisions of the Acts and verdict of Supreme Court. The new Act defines rights of nominees more clearly.

6. In the existing PPF Act, there is no facility for nomination if PPF account opened in the name of a minor. If such minor account holder dies and the amount is more than prescribed limit, the amount can be paid only to legal heirs. In such case, the guardian has to obtain succession certificate. To avoid this problem, provisions for nomination for the account opened in the name of minors have been incorporated in the new Act. Further, the provision has been made that in the event of death, the balances would be paid to the guardian if there is no nomination.

7. The existing PPF Act is silent about grievance redressal. The new Act will allow the provision of grievances redressal mechanism to settle the disputes quickly and amicably.

Apart from offering higher interest rates compared to bank deposits, PPF scheme also enjoys income tax benefits. No change in interest rate or tax policy on PPF scheme is being made through this amendment.

Also read: SBI PPF Account | How to open PPF account in SBI?

Also read: PPF Account in HDFC Bank

Also read: Things you should know about PPF account

Also read: Public Provident Fund | 15 lesser known facts about PPF account

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Public Provident Fund | New PPF Rules | Premature Closure of PPF Account