The Ministry of Finance has made certain Major Changes regarding the Public Provident Fund ( PPF ) accounts established via post offices. The PPF is a widely used financial tool, which is used to promote savings and investments providing benefits to investors on long term. Current interest rate of the PPF scheme is 7.1% per annum.
The Rules have undergone different changes which will be effective from 1st October 2024. These changes mainly focuses on:
Accounts opened for minors, the eligibility of Non-Resident Indians ( NRIs ) to extend their PPF accounts within the framework of National Savings Schemes administered by post offices and the ownership of multiple PPF accounts.
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Rule Change Regarding Irregular PPF Account
According to the new rules, the PPF only allows “One Account per individual.” However, many opened accounts in the name of their minor child to claim extra tax benefits. Thus moving forward, a person holding more than One Account including one for their minor will be considered irregular.
The PPF Account will continue to earn interest at Scheme rate, provided that the deposit amount does not exceed the annual ceiling limit. Any second account will be merged with the main account, assuming the combined balance is within the Annual limit.
If the second account holds funds, those funds will be merged with the primary account, ensuring that the combined total remains within the yearly investment cap.
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After the consolidation, the primary account will maintain the existing scheme interest rate. Any excess funds in the second account will be refunded without any interest. Beyond the primary and secondary accounts, there will be no earning of any interest from the date of their opening.
Rule Change regarding the PPF Accounts for minors
The PPF Accounts opened in the name of a minor, will continue to earn interest at the Post Office Savings Account ( POSA ) rate until the minor reaches 18 years of age. The maturity period for such accounts will be the date the minor attains adulthood, which is the point at which they become eligible to independently open and operate an account.
Points to remember:
Rule Change regarding the PPF Accounts for NRIs
The NRIs are permitted to maintain the PPF accounts until maturity, but they will receive only Post Office Savings Account ( POSA ) interest rate until September 30, 2024. After that they will no longer accrue Interest due to non-compliance with the residency requirements specified in Form H. These modifications will predominantly impact Indian nationals who transitioned to NRI status subsequent to the activation of their PPF accounts.
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The PPF falls under the EEE ( exempt-exempt-exempt ) category, i.e the initial investment, accumulated interest, and final maturity sum are tax exempted as per regulations of Income Tax Act, 1961.
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