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11 Changes in New PPF Scheme 2019


Recently on 12.12.2019, the government has notified new Public Provident Fund or PPF rules replacing all the earlier rules. There are certain changes in the new PPF rules 2019 versus old PPF rules of 1968, as amended from time to time.

This article presents 11 changes in the New PPF Rules, 2019 as compared to old PPF Rules, 1968.

PPF is one of the most popular small savings schemes as it offers a guaranteed return. PPF accounts have a maturity period of 15 years, which can be extended for a period of 5 years after maturity, and the government announces interest rates for each quarter. Although interest for PPF accounts is announced quarterly, but it is credited to the account at the end of each year only.

Here are the changes in the PPF Rules, 2019 as compared to PPF Rules of 1968, as amended from time to time.

1. Deposit in Multiples of Rs. 50/-

Old Rule: The PPF Rules, 1968 allowed deposit in a PPF account in multiples of Rs. 5/-.

New Rule: There are changes in the PPF Rule, 2019. As per the new rule, deposit in a PPF is allowed in multiples of Rs. 50/- only.

Remarks: There is no change in PPF rules for the minimum amount of deposit and the same is retained at Rs. 500/-.

2. Limit on number of times for deposit

Old Rule: The PPF Rules, 1968 allowed 12 deposits in a financial year.

New Rule: There are changes in the PPF Rule, 2019. As per the new rule, the limit on the number of deposits in a PPF in a financial year is dispensed with. There is no restriction or limit in the number of times a person can deposit contributions in his PPF account.

Remarks: However, the maximum amount of deposit in a PPF account in a financial year cannot exceed Rs. 1,50,000.

3. Reduction in Interest on Loans against a PPF account

Old Rule: As per PPF Rules, 1968, a person taking a loan against his PPF account was required to pay interest on such a loan @ 2 percent.

New Rule: There are changes in the PPF Rule, 2019. As per the new rule, the interest on loan taken by a person against his PPF account is fixed at 1 percent. Hence, there is a reduction in the rate of interest of 1 percent.

Remarks: During the loan period, the PPF account does not earn interest to the extent of loan amount. Hence, one forego the interest income on the PPF account which is exempt income under the income-tax laws.

4. New condition added for premature closure of a PPF account

Old Rule: The PPF Rules, 1968 was amended in 2016 to allow for premature closure of account under the following circumstances-

a) For the treatment of serious ailments or life-threatening diseases of the account holder, spouse or dependent children or parents, on production of supporting documents from a competent medical authority.

b) For higher education of the account holder or the minor account holder.

New Rule: There are changes in the PPF Rule, 2019. As per the new rule, the old conditions for premature closure of a PPF account have been retained in the new rules. However, the new rules of 2019 added a new condition under which a PPF account can be closed prematurely on change of residential status of the account holder.

Hence, a PPF account holder can prematurely close his account if he becomes a non-resident.

Remarks: 1. Premature closure of a PPF account is allowed after 5 years of account opening.

2. Penal interest of 1 percent will apply for premature closure of account.

5. Changes in PPF Forms

New Form under PPF Rules, 2019
Old Form under PPF Rules, 1968
Application for Opening a Public Provident Fund (PPF) Account
Form 1 (Nomination included)
Form A / Form E for nomination
Application for Loan/Withdrawal from PPF Account
Form 2
Form C / Form D
Application for Closure of PPF Account
Form 3
Form C
Application for Extension of PPF Account
Form 4
Form H
Application for Premature Closure of PPF Account
Form 5
Challan for depositing contribution
Form B

The old forms were numbered alphabetically whereas new forms are numerically numbered.

6. General Rules will apply: The PPF Rules of 1968 were self-contained rules. All the rules were incorporated in the PPF rules itself. No reference to other rules was required.

However, in the case of PPF Rules, 2019 it is provided that where no specific rules are made in the scheme but are available in the Government Savings Promotion General Rules, 2018 (termed as 'General Rules' in the PPF Scheme, 2019) then provisions of such rules shall apply.

The rules related to non-residents are not covered in the PPF Scheme, 2019 but are contained in the General Rules.

7. Provisions related to Non-residents: The 1968 Rules contained express provisions on non-residents in the scheme itself whereas the 2019 rules on PPF does not contain the provisions but are referred and covered in the General Rules.

8. Rules on minor account holders: Though the rules of 1968 contained the provisions on minor account holders but the rules of 2019 are more clear and expressive.

9. Rules on 'person of unsound mind' account holders: The new rules contains specific and express provisions for persons of unsound mind compared to old rules.

The following two rules are not part of PPF Scheme, 2019 but changes are applicable on all PPF accounts.

10. The Department of Post recently allowed deposit of post office savings account cheque of any amount into PPF account, subject to an overall limit, at any non-home post office branch. The earlier limit was Rs 25,000. The same rule applies for post office recurring deposit, PPF, and Sukanya Samriddhi accounts.

11. The Department of Post notification further states that all POSB cheques issued by any CBS Post Office, if presented at any CBS Post Office should be treated as at par cheques and should not be sent for clearing.

POSB cheque can be accepted at other SOLs or service outlets (without the restriction of amount, for credit in POSB/RD/PPF/SSA accounts, subject to the limits, if any, prescribed in the scheme.

Also Read:
Layman Guide to PPF Laws and Rules

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