5 Proposed Changes To PPF That Will Benefit You   Feb 21, 2018

PPF Inside
Do you have a medical emergency at home or are you short of funds to educate your children at top-grade schools? Until now, withdrawing money from your Public Provident Fund (PPF) for these reasons wasn’t possible before the completion of five years. However, it will soon be.

The government has proposed to merge the Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873.

The provisions of to-be-merged Acts would be subsumed with the Government Savings Banks Act, 1873 without compromising on any of the functional provision of the existing Act. These changes are in line with the government’s objective of providing “Minimum Government, Maximum Governance.”

If you invest in Small Savings Schemes (SSS) including PPF, you are likely to enjoy greater flexibility after the proposed merger, of the existing Acts governing the different SSS instruments and the amendments to the surviving Act, comes into effect.

What’s going to change for PPF investors?

  1. Account closure before the completion of five financial years will become possible to deal with emergencies; earlier this wasn’t possible.
  2. The rules pertaining to investments by minors in SSS will be designed to promote the culture of saving among children. The guardian will be allowed to make investments on behalf of the minor.
  3. The rights of the nominee aren’t clearly defined in the existing Acts and a Supreme Court order stating that “nominee(s) is merely empowered to collect the amounts as Trustee for the benefit of legal heirs” has been creating a disharmony between the provisions of the Act and the order of the highest judicial authority of India. The government intends to offer more clarity on the rights of the nominee
  4. Under the present regime, there’s no adequate grievance redressal mechanism for the SSS investors. The amended Government Savings Banks Act, 1873 will have strong guidelines for the speedy settlement of disputes.
  5. Some SSS schemes have favourable tax and interest rate policies. Those will continue even in the new regime.

With the introduction of proposed changes, PPF will become even more attractive, as well as a flexible investment avenue. However, you shouldn’t foreclose your account for emergencies. You should try to create a buffer for emergencies instead by keeping aside money equivalent to six months’ expenses.

Financial planning helps you take a holistic view of your finances. It not only helps you satisfy your financial goals, but also guides you on dealing with unforeseen emergencies. Opting for adequate health insurance and life insurance cover can help you avert the decision of selling assets in distress to raise funds for emergencies.

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