Many changes made in SCSS, PPF and Post office savings rules

The government issued a notification on November 9, 2023, making several important changes in the popular Senior Citizen’s Savings Scheme (SCSS), Public Provident Fund (PPF), and 5-year post office time deposit.

1. Senior Citizen Savings Scheme:

As per new rules, individuals of 55 Years and above who retired before 60 years of age can invest the retirement benefits in the SCSS scheme within 3 months from the date of receipt of retirement benefits. As per old rules, the time limit for opening an SCSS account was 1 month from the date of receipt of retirement benefits.

Rules for continuation of existing SCSS account:

As per the notification, “The deposit made at the time of opening of account shall be paid on or after the expiry of five years or after the expiry of each block period of three years where the account was extended under paragraph 8 from the date of opening of account. As per the old rule, the extension was allowed only once.

As per the new rules, the account holder can continue to extend the account for any number of blocks of three years each.  Further, the application has to be submitted for every extension. The application for such an extension should be submitted within one year from the date of maturity/extended maturity. The deposit will be extended from the date of maturity/extended maturity (irrespective of the date of application for extension at an interest rate as applicable as of the date of maturity/Extended maturity. (In case the deposit is already extended).

The maximum amount of deposit permitted under the scheme is Rs 30 lakh including the SCSS deposits already made and extended.

Penalty for premature closure before the expiry of one year:

As per the new rules, 1 (one) percent of the deposit will be deducted if the account is closed before the expiry of one year of the investment. As per the earlier rule, if SCSS deposits are closed within 1 Year, the entire interest paid on the deposit will be recovered.

Investment by spouse of government employee

The new rules allow the spouse of a deceased government employee to invest the financial assistance amount in the scheme. Spouse of the Government employee (State /Central Government employee must be 50 Years and above and who died while in service) can invest retirement benefits/death compensation in SCSS

As per the notification, retirement benefit means any payment received by the individual due to retirement or superannuation. This includes provident fund dues, retirement or superannuation or death gratuity, commuted value of pension, leave encashment, savings element of group savings linked insurance scheme payable by the employer on retirement, retirement-cum-withdrawal benefit under Employees’ Pension Scheme (EPS) and ex gratia payments under a voluntary or special voluntary retirement scheme. Under the new rules, the scope of retirement benefits is enlarged to include EPF withdrawal, ex gratia, Compensation, leave encashment, etc.

To know more, read: ALL INFORMATION ON INVESTMENTS IN SENIOR CITIZENS’ SAVINGS SCHEME

• PPF ACCOUNT

New rules for premature closure of Account:

The earlier rule says; “Provided further that on such premature closure, interest in the account shall be allowed at a rate which shall be lower by 1% than the rate at which interest has been credited in the account from time to time since the date of opening of the account, or the date of extension of the account, as the case may be”

New Rule: In the Public Provident Fund Scheme, 2019, in paragraph 13, in the second proviso, for the words “or the date of extension of the account”, the words “or from the date of commencement of the current block period of five years” shall be substituted, as per the latest Department of Post notification.

The above substitution means that the interest will be allowed in the account at a rate that will be 1% less than the interest that has been periodically credited to the account from the date of commencement of the current block period of five years.

To know more, read: ALL INFORMATION ON THE PPF SCHEME

• Premature withdrawal penalty for post office FDs

Post office time deposit account permits their account holders to withdraw funds even before their maturity. The only applicable condition is that a minimum of 6 months must have been passed from the date of first deposit in order to qualify for premature withdrawal. The following are key terms and conditions in case of premature withdrawal of a Time Deposit-

If the premature withdrawal of 1/2/3 or 5-year Time Deposits is made after the completion of 6 months but before the completion of 1 year from the date of time deposit account opening, simple interest is payable as per Post Office Savings Account interest rate

If the premature withdrawal of a 2/3/5 year TD account is done after 1 year from the date of account opening, the applicable interest rate is 2% lower than the TD interest rate (that is, 1/2/3 years) for completed years and for a part period less than a year, Post Office savings interest rate will be applicable.

It means that on premature withdrawal, the interest of the post office savings account which is 4% will be paid.

 If a deposit of a 5-year term deposit account in the Post Office is withdrawn prematurely after four years from the date of account opening, interest at the Post Office Savings Account rate of 4%.

Earlier, if a five-year time deposit account is closed after four years from the date of deposit, the rate applicable to three-year time deposit accounts will be used to calculate interest.

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