New PPF Rules From October 1 You Need to Know
Rounaq Neroy
Sep 03, 2024 / Reading Time: Approx. 4 mins
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The Public Provident Fund (PPF) -- a Central Government-backed long-term saving avenue notified under the Public Provident Fund Scheme, 2019 -- is one of the popular investment avenues to plan for long-term financial goals, viz. retirement to even planning for your child's future goals, plus also facilitates tax planning.
Over the years, several changes have been made to the PPF rules. Recently, in August 2024, the Department of Economic Affairs, under the Ministry of Finance issued a circular notifying revision to PPF.
The revision in rules, which come into effect from October 1, 2024, pertain to PPF accounts opened in the name of minors, multiple PPF accounts held, and the extension of PPF accounts by Non-Resident Indians (NRIs) under the National Saving Schemes held through the post office.
The circular dated August 21, 2024, states:
"It needs to be noted that the powers 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."
So, what will change?
Minor's PPF Account: A parent or legal guardian, who is a resident Indian, and has opened a PPF on behalf of a minor (who is also a resident of India) should note that the Post Office Savings Account (POSA) interest shall be paid for such irregular account until the minor become eligible for opening of the account, that is, individual attains 18 years of age. Thereafter, the applicable interest rate will be paid.
Moreover, the maturity period for such accounts will be calculated from the date the minor becomes an adult, that is, the date from which the individual becomes eligible to open the account.
Multiple PPF Account: In such cases, the primary account shall earn the scheme's rate of interest, subject to the deposit being within the ceiling applicable each year.
Note, that a primary account is one of the two accounts chosen by the investor in any post office/agency bank where the investor prefers to continue with the account upon regularisation.
The balance amount in the second account, in such a case, shall be merged with the first account subject to the primary account remaining active within the applicable investment ceiling in each year.
Post-merger, the primary account will continue to enjoy the prevailing scheme's rate of interest. The excess balance in the second account, if any, shall be refunded with a zero percent rate of interest.
Also, any additional accounts beyond the primary and second account, shall earn a zero percent rate of interest from the date of opening of that account.
Extension of PPF account by NRIs: For only those active NRI accounts opened under the PPF Scheme 1968, where 'Form H' did not specifically ask for the residency status of the account holder, the POSA rate shall be given to the account holder (i.e. Indian citizen who became an NRI during the currency of the account) till September 30, 2024. Thereafter, it should be noted that the said account shall earn a zero percent rate of interest. Currently, NRIs with PPF Accounts do not require residency details to continue earning the POSA interest rate.
To conclude...
The aforementioned guidelines aim to address and regularise the discrepancies in how these accounts were initially operated.
If you hold any of the PPF accounts with cases as discussed above, it would be prudent to take suitable action before the changes, come into effect.
It appears that the government has taken steps for such accounts weighing the cost to the exchequer.
Invest sensibly in wealth-creating avenues in the interest of your financial well-being.
Be a thoughtful investor.
Happy Investing!
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ROUNAQ NEROY heads the content activity at PersonalFN and is the Chief Editor of PersonalFN’s newsletter, The Daily Wealth Letter.
As the co-editor of premium services, viz. Investment Ideas Note, the Multi-Asset Corner Report, and the Retire Rich Report; Rounaq brings forth potentially the best investment ideas and opportunities to help investors plan for a happy and blissful financial future.
He has also authored and been the voice of PersonalFN’s e-learning course -- which aims at helping investors become their own financial planners. Besides, he actively contributes to a variety of issues of Money Simplified, PersonalFN’s e-guides in the endeavour and passion to educate investors.
He is a post-graduate in commerce (M. Com), with an MBA in Finance, and a gold medallist in Certificate Programme in Capital Market (from BSE Training Institute in association with JBIMS). Rounaq holds over 18+ years of experience in the financial services industry.
Disclaimer: This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes. Use of this information is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and use such independent advisors as he believes necessary.