benefits of PPF

Proposed benefits of PPF by the Government

February 15, 2018

In this post, we will discuss the benefits of PPF or Public Provident Fund. Below are some things to know about the changes proposed in PPF rules.

The Public Provident Fund is the most popular saving schemes. Apart from higher interest rates compared to bank deposits, it also offers a host of income tax benefits. With regard to income tax implications, PPF enjoys an EEE – Exempt, Exempt, Exempt – status. This means that the contribution, interest and maturity proceeds are tax-free. PPF contribution up to Rs. 1.5 lakh in an FY is eligible for tax deductions under Section 80C of the Income Tax Act. Now, PPF accounts are likely to come with more benefits.

  1. The govt has proposed to allow premature closure of Public Provident Fund (PPF) accounts.
  2. According to the present PPF rules, premature closure of PPF account is allowed only under specific conditions such as expenditure towards medical treatment and higher education. Their account has to complete at least 5 FYs.
  3. “In order to make provisions for premature closure easier in respect of all schemes, provisions could be made through specific scheme notification. The benefits of premature closure of small savings schemes may now be introduced to deal with medical emergencies, higher education needs, etc,” the Ministry of Finance said this in a statement.
  4. The govt has also planned to consolidate PPF Act under the proposed Government Savings Promotion Act. The government has addressed that “No existing benefits to depositors are proposed to be taken away through this process”.
  5. “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 small saving schemes, and also to introduce certain flexibilities for the investors,” the Finance Ministry said.
  6. PPF accounts are immune from attachment under court decree order. The Finance Ministry has also clarified that there is no proposal to withdraw the provision and the existing and future depositors will continue to enjoy protection from the attachment under the amended umbrella Act as well.
  7.  Apart from ensuring existing benefits, the government has also proposed certain new benefits to the depositors under the bill to merge Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873.
  8. “The existing Acts are silent about grievance redressal. The Acts which are amended allows the government to put in place mechanism for redressal of grievances and for amicable and expeditious settlement of disputes relating to Small Savings,” the Finance Ministry said.
  9. As per the existing provisions of the Acts, if the depositor dies and nomination exists, the outstanding balances will be paid to the nominee(s). The Supreme Court in its judgment stated that nominee(s) is merely empowered to collect the amounts as trustee for the benefit of legal heirs, the Finance Ministry added. “It was creating disputes between the provisions of the Acts and verdict of the Supreme Court. Thus, the right of nominees have currently been more clearly defined,” the ministry said in a statement.
  10. There is no change in interest rate or tax policy on small savings scheme being made through this amendment, the govt clarified. The interest rate on PPF accounts, like other small savings schemes, is reset on a quarterly basis. Presently, PPF accounts fetch an interest rate of 7.6 percent (for Jan-Mar quarter).

This ends our post if you have any doubts or questions regarding this post kindly drop them in the comment section below.

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