New rules from 1st October : 3 major changes in Public Provident Fund account holders must know
News Mania Desk/Piyal Chatterjee/5th September 2024
Recently, the Ministry of Finance’s Department of Economic Affairs released recommendations for regularizing irregular Public Provident Fund accounts that were opened through post offices in violation of the regulations governing small savings programs. Guidelines on numerous PPF accounts, regularization of PPF accounts formed in minors’ names, and NRIs’ extension of PPF accounts have been released.
On August 21, 2024, the ministry released a circular outlining the procedures for handling irregularly opened accounts under different National Small Savings Schemes when they are processed through post offices. With effect from October 1, 2024, the circular explains new regulations for regularizing irregular PPF, Sukanya Samriddhi Yojana, and other modest savings plans.
According to the circular dated August 21, 2024, “lt needs to be noted that the power to regularise irregular small savings accounts are vested with the Ministry of Finance. Therefore, all cases pertaining to irregular accounts should be forwarded to this division for regularisation by the Ministry of Finance.”
Rules for regularization of irregular PPF accounts in 3 different cases are as follows:
Post Office Savings Accounts (POSA)
Interest on irregular Post Office Savings Accounts (POSA) opened in the name of a minor will continue to be paid until the minor turns 18 and becomes eligible to open an account. Once they reach this age, the applicable interest rate will apply.The maturity period for these accounts will begin on the date when the minor reaches adulthood, which is when they are eligible to open the account.
Multiple PPF accounts
Irregularities arise when an individual has multiple PPF accounts. The main account will receive the scheme’s interest rate as long as the deposit stays within the annual limit. This primary account is one of the two accounts selected by the investor at a Post Office or agency bank, and the investor chooses to retain this account after it is regularized.The funds from the second account will be combined with the first account, as long as the primary account does not exceed the designated investment limit each year. After the merger, the primary account will keep earning interest at the existing scheme rate. Any surplus amount in the second account will be refunded at a zero percent interest rate.Except for the primary and secondary accounts, all other accounts will not earn any interest from the day they are opened.
PPF accounts for NRIs states
An irregularity concerning the extension of PPF accounts for NRIs states that only active NRI PPF accounts established under the Public Provident Fund Scheme (PPF), 1968, which did not require the account holder to disclose their residency status in Form H, will continue to earn a POSA interest rate for Indian citizens who transitioned to NRI status while the account was active, until September 30, 2024. After this date, these accounts will earn no interest.
