New PPF Rules – Premature Closure Relaxation

In Stock Market | Last Updated October 16, 2017|3 Comments

New PPF Rules – PPF is one of the most popular investment options in India. PPF offers multiple benefits including tax-free interest income, tax exemption, and risk-free investment. If you are holding PPF account this post is for you. PPF Rules are recently revised by the government of India. As per recent notification dated 13th Feb 2018, Finance ministry has proposed an expansion in the scope of benefit for PPF scheme.

At present, there are multiple acts with respect to Small Saving Schemes. It sometimes creates confusion among investors. In order to remove this ambiguity, it is proposed to merge the Government Savings Certificate Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Bank Act, 1873. Accordingly, NSC and PPF scheme provisions would be subsumed and a new amended act called as “Government Saving Promotion Act” is proposed.

New relaxation is proposed in this new act keeping all existing benefits intact. This means none of the benefits available to the investors under the present PPF Act would be withdrawn or amended. You will continue to earn tax-free interest income and tax exemption. PPF interest rates will remain intact.

In addition to all existing PPF benefits following additional benefits is proposed for PPF account holders.

New PPF Rules – Premature Closure Relaxation

PPF Rules

  • As per PPF rule, PPF account can’t be closed prematurely before completion of five financial years. This restriction is proposed to be relaxed and PPF account holder will be allowed to close PPF account in case of exigencies like a medical emergency, higher education etc.
  • For PPF accounts opened by the guardian in the name of the minor, the guardian would also enjoy associated rights and responsibilities.
  • In order to promote a culture of saving among children, clear provision is made regarding deposit made by minors.
  • In the present act provision about the operation of an account in the name of the minor or differently abled person is not available. The new act covers relevant rules in this regard.
  • The new act defines rights of nominee more clearly. This will help in faster claim settlement and also reduce disputes.
  • At present, there is no facility of defining nominee in case account is opened in the name of the minor. Further, existing Acts say that if account holder dies and there is no nomination and amount is more than prescribed limit, the amount shall be paid to legal heirs.  In this case, the guardian has to obtain succession certificate. To remove this inconvenience, provisions for a nomination with regard to an account opened in the name of minors have been incorporated. Further, the provision has been made that if the minor dies and there is no nomination, the balances shall be paid to the guardian.
  • The current act is silent about grievance redressal. The new act will ensure the provision of strong grievance redressal system so that dispute can be settled quickly.

The new PPF Rules notification clearly specify that no changes are made with respect to interest rate or tax policy on small savings scheme. One should not worry that certain Small Savings Schemes would be closed.

These new PPF rules are proposed changes. It is not clear that when this rules will be imposed.

What is your opinion on PPF Rule Changes?

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  1. Ramkumar K N says:

    Hi RAvi

    what is the kind of taxes we have to pay when we withdraw this pf amount before 5 years?
    im in the highest salary band


    Dear Mr Raviraj,
    I have been reading your articles regularly and find them very informative.
    Please keep sending.
    Warm Regards,
    Shamim Parekh

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