Proposed PPF changes to benefit investors

Proposed PPF changes to benefit investors 

The finance ministry in a notification has stated that "no existing benefits to depositors are proposed to be taken away" and has clarified on the proposed changes to the Public Provident Fund (PPF): 

1. The Government Savings Certificates Act, 1959 and the Public Provident Fund Act, 1968 are proposed to be merged 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 (small savings schemes), and also to introduce certain flexibilities for the investors," says the notification. 

 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 be closed 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 Finance Bill 2018 and the guardian may also be given associated rights and responsibilities. The new element has been incorporated to promote savings among children," says the notification. 

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 the death of a small savings scheme investor, citing Supreme Court rulings. A grievance redressal mechanism has also been put in place for amicable and quick settlement of disputes. Small savings schemes include Post Office Savings Account, National Savings Monthly Income, National Savings Recurring Deposit, PPF and Sukanya Samriddhi Yojana. 

5. The government has also said that no existing benefit is proposed to be withdrawn, pointing specifically to the fact that PPF accounts cannot be attached through a court order. 

Among the most popular saving schemes, PPF offers higher interest rates compared to bank fixed deposits (FDs) and also comes with income tax benefits: PPF contribution, interest and maturity proceeds are all taxfree. Contributions of up to Rs 1.5 lakh in a financial year are eligible for tax deductions under Section 80C of the Income-Tax Act.

The Economic Times, New Delhi, 19th February 2018