- Date : 27/02/2020
- Read: 3 mins
What are the recent changes made by the government in the PPF rules and how does it affect the account holders?
Last year the government had made some procedural changes to the Public Provident Fund (PPF). The PPF was governed by the provisions of the PPF Act 1968 until the repealing of the Act through chapter VIII of Finance Act 2018. Presently, PPF is governed by the Government Savings Promotion Act 1873 and Public Provident Fund Schemes Rules 2019. The Department of Posts has also made procedural changes accordingly. The changes made to the scheme are:
1. A PPF account can be extended for deposits within one year of the maturity by applying in Form 4. Earlier a PPF account holder had to submit Form H for the same. Even if it is not extended and no deposits are made after the maturity, the balance will continue to accumulate interest. In such a situation, the account holder will be able to make one withdrawal in each financial year.
2. A PPF account holder can now make any number of deposits in multiples of Rs 50, subject to a maximum annual deposit of Rs 1.5 lakhs a year. Earlier you could make only twelve deposits in a year.
3. Premature closure of PPF account was allowed only after five years of account opening and in case of fund requirement for medical treatment or higher education. Now PPF account can also be closed prematurely in case of a change in the residential status of the account holder. Copy of passport and visa or income tax return is required for this purpose.
4. The rate of interest on loan against PPF account has been reduced from 2% above the PPF rate to 1%. These loans can be applied between the third and fifth year of the account tenure.
5. A loan availed against a PPF account has to be repaid after 36 months and failing to do so fully or even partly, attracts the penal interest of 6% per annum.
When does a PPF deposit mature?
A PPF account has a tenure of 15 years. At the end of maturity, the investment can be extended in blocks of 5 years.
When can PPF deposit be withdrawn?
Although PPF can be withdrawn at the end of its maturity, there are provisions for premature withdrawals. If the account holder has a special fund requirement, there is the provision of partial withdrawal after the completion of the sixth year. Partial withdrawals of up to 50% can be made at the end of the 4th year after the year in which the withdrawal is made or after the end of the preceding year, whichever is lower.
What if the account holder fails to make a deposit in the PPF account?
If an account holder fails to deposit the minimum amount into the PPF account, the account is treated as discontinued. However, such an account can be revived at the time of maturity by paying Rs 50 along with the minimum deposit for each defaulted year. The balance in the discontinued account will, however, continue to earn interest. Additionally, a person cannot open a new PPF account without the closure of the discontinued account.