The Government of India notified new rules for the PPF scheme called ‘Public Provident Fund Scheme 2019’, which has replaced all previous rules in respect of deposits, loans, and premature withdrawal, with immediate effect. The following are important changes made in the revised PPF rules.
- Under the new rules, the amount in the the PPF account will not be liable to attachment under any order or decree of any court in respect of any debt or liability incurred by the account holder.
- Deposit rule: As per new PPF deposit rules; an account holder can make deposits in multiples of ₹50 any number of times in a financial year, with a maximum of a combined deposit of ₹1.5 lakh a financial year. Earlier, a minimum amount of Rs.500 and maximum of 12 deposits in a financial year were permitted in a period of 1 year. As per earlier rule, not more than one subscription can be accepted in a month, now that condition is removed, the account holder can remit any number times in a month.
- The interest rate on loan: Under the new rules, the rates at which the account holder can borrow from his account have been reduced to 1% above the prevailing PPF interest rate, from 2% in the past. PPF account entails you to obtain a loan on balance available in the account repayable in 24 months. An account holder can take the first loan from the PPF account in the third year from the year of opening the account. For example, if you have opened the PPF account in 2013-04 you can apply for a loan in 2015-16. You can also avail of further loans up to the end of 5 years once the previous loan is fully repaid. The fresh loan will be restricted to 25 percent of the credit at the end of the second year immediately preceding the year in which the loan is applied for. In case of death of the account holder, the nominee or legal heir shall be liable to pay interest on the loan availed by the account holder but not repaid before his death. Such amount of due interest shall be adjusted at the time of the final closure of the account. In case of death of the account holder, the nominee or legal heir shall be liable to pay interest on the loan availed by the account holder but not repaid before his death. Such amount of due interest shall be adjusted at the time of final closure of the account.
- Non-refundable withdrawal: The non-refundable withdrawal from the PPF account will be available once in a five years. Now the PPF investors will be able to withdraw 50 percent of their fourth-year-end balance. Earlier, a PPF account holder would able to withdraw 25 of the accumulated amount after seven years. Partial withdrawals from the PPF are tax-free.
- Premature closure of PPF account: Premature closure of PPF account is allowed only under specific circumstances only after five years after account opening. Such premature closure is allowed for (i) treatment of life-threatening disease of the account holder, his/her spouse or dependent children or parents, on production of supporting documents and medical reports confirming such disease from treating medical authority and (ii)higher education of the account holder, or dependent children on production of documents and fee bills in confirmation of admission in a recognized institute of higher education in India or abroad. In the new rules, one more criteria are added for premature closure of PPF account. An account holder can close the account on change in residency status of the account holder on production of copy of passport and visa or income tax return. For premature closure of PPF accounts, the account holder gets 1% lower interest than the rate at which interest has been credited to the account.
- Joint account: As per earlier rule, PPF account cannot be opened in joint names. .Joint account is now allowed.
- Minor’s account and people of unsound mind: Earlier there was clarity on opening the PPF account in the name of Minor. In the new rule, it is more clearly explained. There can be only one account in the name of a minor. The maximum deposit limit is inclusive of the deposits made in the subscriber’s own account and in the account opened on behalf of the minor.
- An account can be opened by the guardian of an individual or children with unsound mind, special needs.
Other information on PPF account:
- PPF is one of the most popular small savings schemes and it offers a guaranteed return. PPF accounts have a maturity period of 15 years. Interest in PPF account is calculated on the minimum balance between 5th and the end of each month. To maximize interest, a subscriber should deposit the contributions or lump sums before the 5th of each month. The government announces interest rates for each quarter. For the current quarter, PPF fetches an interest rates of 7.9% per annum (for the latest rate click “Rate”). Interest is calculated for a calendar month on the lowest balance at the credit of an account between the close of the fifth day and the end of the month. Interest is credited to the account at the end of each financial year (As at 31st March).
- To revive an inactive account, you will have to pay a penalty of Rs.50 per year for the number of years the account has been inactive along with a minimum contribution of Rs.500 per year.
- You can nominate one or more persons to receive any final payment, which is due to you.
- A PPF account can be retained after the maturity period of 15 years, with or without making any further contribution. The PPF account continues to earn interest till it is closed. Partial withdrawals are also allowed even if the PPF account is extended beyond 15 years. If he wants to extend beyond 15 years, he has to apply for the same in Form H within one year from the date of maturity.
- NRIs are not eligible to open PPF accounts. NRI can continue to remit in PPF account when the account was opened when he was a resident and subsequently the residential status was changed. The account can be continued until the maturity period of 15 years. No further extension is allowed. Remittance can be made from NRE/NRO accounts. Repatriation of PPF maturity amount is as per rules applicable to NRO accounts. [Note: As per Ministry of Finance Notification number GSR1237(E) dated 3.10.17, PPF accounts of resident Indians who became NRIs during the currency of the maturity period, would be deemed closed from the date from which the account holder became an NRI. However, this rule has now been put in abeyance (as per Govt OM no. F/01/10/2016-NS dated 23.02.18) and NRIs can continue to hold PPF accounts as before.]
- The Department of Post, through a notification dated December 2, has allowed deposit of post office savings account cheque of any amount into your PPF account, subject to an overall limit, at any non-home post office branch. The earlier limit was only ₹25,000. The notification also mentions “AII POSB cheques issued by any CBS Post Office, if presented at any CBS Post Office should be treated as at par cheques and should not be sent for clearing. POSB cheque can be accepted at other SOLs or service outlets (without the restriction of amount, for credit in POSB/RD/PPF/SSA accounts, subject to the limits, if any, prescribed in the scheme,”