New PPF Rules

New PPF Rules
A wise man has said that the best saving habit reflects in one who starts saving from their very first paycheck. Well, I inculcated a saving habit even before I started getting my paychecks! I have had a PPF account since I was 18. My parents, being government employees, always considered PPF to be the most reliable investment option. They asserted that a PPF account is the best way to save for the future. They insisted that I deposit the minimum mandatory amount into my PPF account every year. A student back then, I scrimped hard to save a little from my pocket money every month to accumulate enough funds for the yearly PPF deposit. It is a great tool to save and grow your wealth. Before we discuss the new PPF regulations, let’s start with the basics.

What is PPF?

PPF stands for Public Provident Fund. It is a highly popular long-term investment scheme backed by the Indian Government. The PPF scheme was introduced in India in the year 1968, with an objective to enable people to convert small savings into an investment and earn a return on it. It is a savings-cum-tax saving investment that offers a slow but steady growth and decent return. PPF helps in building a retirement corpus while saving substantially on annual taxes. Let’s briefly discuss the features of a PPF account.

Eligibility: All Indian residents, including minors, can open a PPF account. These are individual accounts and cannot be held jointly or in the name of a Hindu United Family. NRIs are not permitted to have a PPF account.

Investment Amount: Individuals can easily open a PPF account with a nominal deposit of Rs. 100. However, account holders must compulsorily deposit a minimum amount of Rs. 500 every year to keep the account active. The maximum amount that one may deposit in a PPF account in each financial year is Rs. 1.5 Lakh.

Tax Benefit: All PPF account holders can claim tax deduction under section 80C of the IT Act for the investments made in the PPF account. The interest earned from the PPF account is also tax-free.

Interest Rate: As of October 2018, the PPF interest rate is 8.0%.  The government revises the rate from time to time.

Maturity Period: All PPF accounts mature in 15 years, following which, the maturity duration can be extended for 5 years.

2018 New PPF Rules

PPF is undoubtedly one of the most preferred investment options in India. It offers multiple benefits, such as tax-free interest income, exemption from tax and a risk-free investment to grow one’s savings. The Government often revises the rules pertaining to PPF accounts. The newest revision was announced on the 13th of February, 2018, in which the Ministry of Finance has proposed to merge the Government Savings Certificates Act of 1959 and the Public Provident Fund Act of 1968 with the Government Savings Banks Act of 1873 and formulate a new act called Government Saving Promotion Act. The Financial Bill of 2018 has proposed some legislative changes to add flexibility in the operation of the accounts under the Small Savings Scheme. This revision promises to expand the scope of benefits of the PPF scheme, keeping all the existing PPF benefits intact.

  • The existing PPF rules specify that a PPF account cannot be closed prematurely before completing five financial years. The new rules have proposed a relaxation of this restriction to allow easier PPF withdrawal. The account holders can now close their PPF accounts and withdraw the deposited amount in case of contingencies such as a medical emergency, higher education, etc.
  • The PPF accounts that are opened by parents or guardians in the name of minors will allow the parent or guardian to enjoy associated rights and responsibilities.
  • Clear provisions are made regarding deposits made by minors in order to promote the culture of saving among children.
  • The present rules do not have any provision regarding the operation of a PPF account for minors or for differently-abled people. The new rules proffer relevant provisions in this regard.
  • Currently, a minor account doesn’t have any nomination facility. According to the existing rules, in the unfortunate event of a minor account holder’s death, the legal heirs can claim the amount only after producing a succession certificate. With an aim to remove this inconvenience, the new rules have introduced provisions for a nomination facility for accounts opened in the name of minors. Moreover, if the minor account doesn’t have a nominee, the balances shall be paid to the parent or guardian.
  • The current rules are silent about grievance redressal with respect to PPF accounts. The new rule proposes to introduce the provision of a strong grievance redressal system in order to settle disputes quickly.

To Sum Up

These new rules aim to benefit the investors and have been formulated keeping the public’s best interest in mind. The rules do not intend to change the PPF interest rate or the tax policy on Small Savings Scheme (SSS). However, all of these new rules are proposed changes; the Government is yet to announce when exactly these rules will be formalized and imposed. So, don’t worry and be happy. None of the existing PPF benefits will be affected. You will continue to enjoy tax-exemption and also earn tax-free income from your PPF account. You can additionally enjoy the extra benefits that come as by-products of the new PPF rules.