The Department of Economic Affairs, under the Ministry of Finance, has introduced new guidelines for the regularization of irregular Public Provident Fund (PPF) accounts that deviate from the standard rules governing small savings schemes through post offices. Effective from October 1, 2024, these new rules address three specific types of irregular PPF accounts: those opened in the name of minors, those involving multiple accounts, and accounts extended by Non-Resident Indians (NRIs).
Overview of the New Guidelines
A circular issued on August 21, 2024, outlines the procedures for rectifying irregularly opened accounts under various National Small Savings Schemes managed through post offices. These changes will impact the PPF, Sukanya Samriddhi Yojana, and other small savings schemes.
The circular specifies that the authority to regularize irregular small savings accounts rests with the Ministry of Finance. Consequently, all cases involving irregular accounts should be forwarded to this division for regularization.
Regularization of Irregular PPF Accounts: Key Rules
1. PPF Accounts Opened in the Name of Minors
For PPF accounts that were opened in the name of a minor, the following rules apply:
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- Interest Payments: The account will earn Post Office Savings Account (POSA) interest until the minor reaches the age of 18. Once the individual turns 18, the account will start earning the applicable PPF interest rate.
- Maturity Period: The maturity period of such accounts will be calculated from the date the minor turns 18, which is when they are eligible to open the account.
2. Multiple PPF Accounts
For cases where an individual has more than one PPF account:
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- Primary Account: The account selected as the primary one will continue to earn the applicable scheme interest rate, provided the deposits do not exceed the annual ceiling.
- Account Merging: The balance from the secondary account will be merged into the primary account, assuming the primary account remains within the annual investment ceiling. The primary account will maintain the current scheme rate of interest. Any excess amount from the secondary account will be repaid at a zero percent interest rate.
- Interest on Other Accounts: All other accounts beyond the primary and secondary will not earn any interest from the day they were opened.
3. Extension of PPF Accounts by NRIs
For PPF accounts extended by NRIs:
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- Interest Rates: Only those NRI PPF accounts opened under the PPF Scheme of 1968, where Form H did not explicitly request the account holder’s residency status, will receive POSA interest rates until September 30, 2024. After this date, these accounts will be subject to a zero percent interest rate.
These new regulations aim to streamline the process of regularizing irregular PPF accounts and ensure compliance with the rules governing small savings schemes. Investors should review their PPF accounts and make any necessary adjustments to align with these new guidelines.
