NEW DELHI: The government clarified on the legislative changes proposed in the Finance Bill 2018 regarding the Public Provident Fund (PPF). The finance ministry in a notification stated that "no existing benefits to depositors are proposed to be taken away" while consolidating the
PPF Act
.
PPF is one the most popular saving schemes that offer higher interest rates compared to bank fixed deposits (FDs) along with income tax benefits. The contribution, interest and maturity proceeds under
PPF
are tax-free. Contribution up to Rs 1.5 lakh in a financial year is eligible for tax deductions under Section 80C of the Income Tax Act.
Here are key things to know about the proposed changes in the PPF:1. The Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 are proposed to merge with the Government Savings Banks Act, 1873. "The main objective in proposing a common Act is to make implementation easier for the depositors as they need not go through different rules and Acts for understanding the provision of various SSS, and also to introduce certain flexibilities for the investors," the notification said.
2. The government proposes to allow premature closure of PPF accounts. In a statement, the finance ministry said that in case of exigencies, such as medical emergencies or higher education needs, PPF accounts will now be allowed to close prematurely. Currently, the
PPF account
cannot be closed prematurely before completion of five financial years.
3. Investment in
small savings
schemes can be made by a guardian on behalf of a minor under the provisions proposed in the Bill and the guardian may also be given associated rights and responsibilities. "The new element has been incorporated to promote savings among children," the statement added.
4. A specific provision has been inserted to allow operation of small savings accounts by differently-abled persons. New provisions have been built in to avoid any dispute in case of death of an investor in
small savings scheme
, given Supreme Court rulings. A grievance redressal mechanism has also been put in place for amicable and expeditious settlement of disputes.
Small savings schemes include Post Office Savings Account, National Savings Monthly Income (Account), National Savings Recurring Deposit, PPF and Sukanya Samriddhi Account.
5. The government also said no existing benefit is proposed to be withdrawn, pointing specifically to the fact that PPF accounts cannot be attached through a court order.