Public Provident Fund (PPF) is a central government-backed savings-cum-investment product known for its investor-friendly features and long-term benefits. The scheme falls in the EEE (exempt-exempt-exempt) category, which means the principal amount, interest earned and the maturity amount will remain tax exempted under the Income Tax Act, 1961.

The Centre has made several changes to PPF rules over the years. Last month also, the Department of Economic Affairs, under the Ministry of Finance, came out with a circular notifying certain revisions to the PPF norms. These changes in PPF rules, to be effective 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.

According to the circular issued by the finance ministry on August 21, 2024, “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.”

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Following are the changes in the PPF rules to be implemented from October 1, 2024:

PPF account opened under the name of a minor:

Post Office Savings Account (POSA) interest shall be paid for such irregular accounts until the individual (minor) becomes eligible for opening of account, that is, the individual attains 18 years of age. Thereafter, the applicable interest rate will be paid.

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.

More than one PPF Account:

The primary account shall earn the scheme rate of interest subject to the deposit being within the ceiling applicable for each year. (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 regularization).

The balance amount in the second account shall be merged with the first account subject to the primary account remaining within the applicable investment ceiling in each year. Post merger, the primary account will continue to enjoy the prevailing scheme rate of interest. Excess balance in the second account, if any, shall be refunded with Zero percent rate of interest.

Any additional accounts beyond the primary and second account, shall earn zero percent rate of interest from the date of opening of that account.

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Extension of PPF account by NRI:

For only those active NRI’s PPF accounts opened under the Public Provident Fund Scheme (PPF), 1968, where Form H did not specifically ask the residency status of the account holder, POSA rate of interest shall be given to the account holder (Indian citizen who became NRI during the currency of Account) till 30th September 2024. Thereafter, the said account shall earn zero percent rate of interest.

Conclusion:

These changes in PPF guidelines are aimed at addressing the discrepancies in the way these accounts have so far been operated. PPF customers are advised to take action as the earliest if these changes are relevant to them.