The Finance Ministry on Tuesday proposed premature closure of Public Provident Fund (PPF) accounts in case of exigencies and clarified provisions regarding opening of small savings accounts for minors, making it easier to open such accounts in the name of children. The government has proposed to merge separate acts on small savings, PPF and government savings bank in the new amended Act without compromising on any of the functional provisions including taxation benefits to the depositors under the existing Act, the Finance Ministry said in a statement. Some new benefits have been proposed under the bill for the depositors, the statement added.
The government has proposed premature closure of the PPF account before five years. Under the existing norms of the PPF Act, the account can’t be closed prematurely before completion of five financial years, even in case if emergencies. The latest proposal allows premature closure of the PPF account before five years in case of medical emergencies, higher education needs, etc. Currently, the scheme allows complete withdrawal only on its maturity i.e. 15 years from the date of enrollment. A subscriber can only go for partial withdrawal only after staying invested in the scheme for five years, as per current norms. A maximum deposit of Rs 1.5 lakh per year can be made into a PPF account.
Account opening by minors
The new proposal also allows a guardian to make investment in small savings schemes on behalf of minor(s). The guardian will also be issued associated rights and responsibilities, the Finance Ministry statement said. The government has introduced this provision to clear ambiguity regarding deposits made by the minors under the existing norms, and to promote culture of savings among children. “As per the existent definition, only parents qualify to be ‘guardians,’ and only they can invest in small savings schemes on behalf of the minors (under 18 years). The new proposal, as per my understanding, broadens the definition of the word ‘guardian’ and now also includes anyone who is legally appointed as a guardian by the parents of the minor,” Jitendra Solanki, a Financial Planner said.
In addition, the proposal also makes it more convenient regarding nomination and withdrawal of funds from a minor’s account. The existing Act doesn’t offer any provision for nomination with regard to account opened in the name of minor. The guardian has to obtain succession certificate to qualify as a legal heir in case the account holder passes away and there is no nomination, and the amount exceeds the prescribed limit. However, now in case of no nomination in a minor’s account, the amount shall be paid to the guardian without any succession certificate in case the minor dies.