Showing posts with label PPF. Show all posts
Showing posts with label PPF. Show all posts

Saturday, March 10, 2018


Premature Closure of PPF Accounts : Loksabha Q&A

ANSWERED ON: 09.03.2018

Closure of PPF Accounts

Will the Minister of

FINANCE be pleased to state:-

(a) whether the Union Government proposes to allow premature closure of Public Provident Fund (PPF) accounts and permit opening of small savings accounts in the name of minor, if so, the details thereof;

(b) the steps taken to make provisions for premature closure easier in respect of all schemes;

(c) whether there are various ambiguities due to multiple Acts and rules for small saving scheme, if so, the details thereof;

(d) whether there is a proposal to merge Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873, if so, the main objective of the common act; and

(e) the other steps taken by the Union Government to address the grievances and settlement of disputes relating to small savings?


(a) & (b) Sir, at present premature closure of a Public Provident Fund (PPF) account is permitted on specified grounds on completion of five financial years from the date of opening of account. Opening of accounts in the name of a minor is permitted under all the small savings scheme except the Senior Citizens’ Savings Scheme.

(c) & (d) Yes Sir. There are some ambiguities due to multiple Acts and rules for small savings schemes and the same are as under:

i Certain provisions are not uniform in the existing three Acts.
ii Some provisions have become redundant with time, which have been proposed to be deleted, with a view to simplify and avoid confusion.
iii Some provisions are not clearly defined in existing Acts, leading to legal issues.

Yes. The main objective of the common act is to bring uniformity in the provisions of different small savings schemes presently governed by the three Acts.

(e) The grievances relating to small savings are addressed by the banks and Department of Posts. Some grievances are also handled by Ministry of Finance.

Source : LokSabha

Monday, March 28, 2016

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High Interest Rates Will Make Indian Economy Sluggish: Arun Jaitley

New Delhi: Justifying slashing of interest rate on small saving instruments like PPF, Finance Minister Arun Jaitley on Monday said interest rates in India are "extraordinarily" high and the country risks becoming the most sluggish economy if lending rates continue to rule high.

The existing tax-free interest rate of up to 8.7 per cent on small saving instruments translates into an effective interest of 12-13 per cent on deposits. Correspondingly, the lending rate, which is always a notch above deposits rate, would be 14-15 per cent, he told PTI in an interview here.

"On small savings, India's interest rates are extraordinarily high. And high interest rate prevents growth," he said.

Citing the example of 8.7 per cent tax free interest on Public Provident Fund (PPF) investments, he said this translates into an interest rate of 12.5 per cent or 13 per cent including tax benefit.

"Where in the world you get 12.5 per cent return of interest? So if deposit rates become 12.5 per cent, then what should lending rates be, 14 to 15 per cent? You will become the most sluggish economy in the world, if lending rates are 14 to 15 per cent," he said.

Jaitley said no country can have "a system where lending rates are low but deposit rates are high. The two are interlinked".

The government had on March 18 announced cut in interest rate on PPF to 8.1 per cent, on Kisan Vikas Patra (KVP) to 7.8 per cent from 8.7 per cent, on girl-child saving, Sukanya Samriddhi Account to 8.6 per cent from 9.2 per cent and senior citizen savings scheme to 8.6 per cent from 9.3 per cent with effect from April 1.

Asked whether the government had taken an unpopular decision, Finance Minister said, "It would be most unpopular decision if India's lending rates were 14 to 15 per cent. To destroy India's economy would be the most unpopular thing to do. Low interest rate in the long run will help everybody."

When a borrower goes to bank for availing home loan, "he should get it at 9 per cent or 15 per cent? Which decision will be unpopular", he asked.

Jaitley said India must have multiple products, giving a range of interest rates. "Even at 8.1 per cent rate is a very good rate of returns, much better than you get anywhere in the world because it is tax free. 8.1 per cent tax free is 12.2 per cent. It's not a small rate of interest.

The government, he said, has to create a mechanism where interest rate become more reasonable and those are transmitted by the banks.

"And also don't forget, the additional argument that you earned 8.7 per cent when inflation was at 11 per cent. When inflation is below 5 per cent, so actually the real rate of interest has gone up," he said.

Jaitley said the move to tax 60 per cent of withdrawals from Employees Provident Fund (EPF) was aimed at discouraging people from making lump sum withdrawals and spending all the money and it was instead aimed at encouraging them to invest in tax-free pension plans to make India a pensioned society.

The proposal was however withdrawal after widespread criticism.

"As India is growing, standards of social security have to increase. And one important component of social security is to make India into a pensioned society," he said.

He said the original proposal to tax withdrawals from EPF was to converge Employees Provident Fund Organisation (EPFO) and National Pension Scheme (NPS) "into a system where you contribute during your earning period, you get a tax rebate (and) when you retire, you get a big lump sum for your social commitments, tax free and the rest becomes an annuity, the 60 per cent becomes an annuity, which is also tax free."

"The inheritance to your heirs will also be tax free. The only change I made was to discourage people from spending this entire amount in one go. So if you want to spend the entire amount in one go, as a disincentive you pay tax on the 60 per cent (of it)," he said.

While EPF withdrawals have been made tax-free, the same has now been extended to NPS as well.

"And I do believe that more and more people should continue to switch over to NPS, which means its a system like in any developed country where during your earning career, you contribute, upon retirement you get a lump sum and then you get a monthly pension.

"I do believe retired people should take care of their monthly pension, to that extent I have no regret even about the EPF scheme," he said.

The minister said many people have told him that it was actually a good scheme.

"After a year I will disclose of how many people have switched over to NPS. And mind you, NPS gives the best returns as compared to any government scheme does," he said.


Monday, January 12, 2015

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Extension of Public Provident Fund (PPF) Scheme up to Post Offices with sanctioned strength of 1+1 (double handed Post Office)

Government of India
Ministry of Communications & IT
Department of Posts
Dak Bhawan, Sansad Marg,
New Delhi-110001, Dated: 09.01.2015
All Heads of Circles/Regions
Addl. Director General, APS, New Delhi.

Subject: - Extension of Public Provident Fund (PPF) Scheme up to Post Offices with sanctioned strength of 1+1 (double handed Post Office) - reg.

Sir / Madam,

The references have been received in this office from time to time to expand PPF scheme to all departmental Post Offices across the country. The matter was examined and it has been decided to expand the operation of PPF scheme up to double handed Post Offices.

2. Expanding the PPF Scheme up to double handed Post Offices will provide a very convenient facility/service to large section of population in their nearby locations, in smaller places/semi urban areas/ rural areas. By extending PPF Scheme up to double handed Post Offices; the Department will be in a position to add 6000 plus locations for the scheme. thereby benefitting the investors.

3. As regards supervising the work of double handed Post Offices. it may be ensured to post senior official as SPM.

4. Necessary amendment in the Inspection Questionnaire of Sub Post Offices will be issued by the concerned branch of Directorate to avoid the possibility of any fraud in PPF accounts on extending the Scheme to double handed Post Offices.

5. It is requested to circulate these instructions to all the field units immediately.  Appropriate publicity needs to be given for awareness of members of public that PPF Account facility is now available in all Post Offices up to double handed. Each double handed post office may display notice to this effect to open maximum PPF Accounts by 31st March, 2015.

This issues with the approval of Secretary Posts.

Yours faithfully,
(L.K. Sinha)
Assistant Director General (FS-I)


Monday, September 08, 2014

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Revision of maximum limit of subscription in a financial year of PPF Account.

No. F.No. 113-01/2011-SB
Government of India
Ministry of Communications & IT
Department of Posts
Dak Bhawan, Sansad Marg,
New Delhi-110001, Dated: 21.08.2014
All Heads of Circles/Regions
Addl. Director General, APS, New Delhi.

Subject:- Revision of maximum limit of subscription in a financial year of PPF Account.

Sir / Madam,

The undersigned is directed to convey the decision of the Min. of Finance (DEA) for revision of existing maximum limit of subscription in a financial year in the existing PPF accounts as well as new PPF account to be opened on or after 13.08.2014. Now the subscription in a financial year shall be Rs 1,50,000/- in "place of Rs 1,00,000/- in PPF accounts. The copy of Gazette Notification No. G.S.R. 588 (E) dated 13.08.2014 issued by MOP (DEA) is enclosed.

2. it is requested to circulate this instruction to all field units and ensure that the instruction is strictly followed.

3. This issues with the approval of Competent Authority.

Yours faithfully,
L.K Sinha
Assistant Director General(FS-I)

Monday, January 02, 2012


PPF an attractive option for all categories of investors

For small investors, the Public Provident Fund (PPF) is one of the most trusted investment avenues. It is a 'must have' in the investment portfolio. The recent enhancement of limit and increase in interest rates has made this instrument even more attractive. The PPF offers safety, good returns, and tax savings . The interest earned on these deposits is taxfree.

In the present volatile situation, where many stocks and funds are yielding negative returns, it is better to invest your hardearned money in safer bets such as the PPF. Due to the recent increase in interest rates on small savings schemes, the biggest beneficiaries are PPF investors. The interest rate is being increased from eight to 8.6 percent.

Moreover, the investment limit is being increased from the present Rs 70,000 to Rs 1 lakh. For investors who do not want to take risks or dabble in the stock markets, the PPF is the best option. Although the PPF is a preferred option of conservative investors, in the present-day market scenario, even aggressive investors may like to opt for this avenue.

The interest rate will be announced in the beginning of every financial year. The tenure of a PPF account is 15 years. After the initial 15 years, you can keep extending the deposit for five years at a time. In case a person starts contributing Rs 1 lakh every year, he can build a tax-free corpus of about Rs 31 lakhs over 15 years, if the interest rate remains 8.6 percent.

Even considering a marginal decrease or increase in the interest rate (of say between 8-9 percent range) the corpus may vary between Rs 29 lakhs and Rs 32 lakhs. With the enhanced investment limit from Rs 70,000 to Rs 1 lakh, you can earn an additional tax-free interest of Rs 2,580. On an investment of Rs 1 lakh, you can get a tax deduction of Rs 30,000 (if you are in the 30 percent tax bracket). The interest earned will be 8.6 percent on Rs 1 lakh, i.e. Rs 8,600.

So, considering the tax benefit under Section 80C, the effective interest return translates to almost 12.29 percent, and fully secured. PPF is a voluntary contribution by an individual. On maturity, the proceeds received are tax-free . Being a statutory scheme of the central government, it is fully secured. The interest is compounded annually. The deposit can be in a lump sum or in convenient instalments , but not more than 12 instalments in a year.

An account in which no deposits are made is treated as a discontinued account. A discontinued account can be activated by paying the minimum deposit along with a default fee for each defaulted year. A PPF account can be opened by an individual or a minor through a guardian. Those who are contributing to the GPF Fund or EDF account can also open a PPF account. No age is prescribed for opening a PPF account.

There is a facility of withdrawal in the seventh year of the account, subject to a limit of 50 percent of the amount at credit, in the preceding three years. Thereafter, one withdrawal in every year is permissible . Premature closure of a PPF account is not permissible except in case of death.


Monday, December 12, 2011

Interest Rate on PPF

The Provident Fund handled by the Employees’ Provident Fund Organisation is known as Employees’ Provident Fund (EPF). Rate of interest on Employees’ Provident Fund for every year is recommended by the Central Board of Trustees, Employees’ Provident Fund on the basis of estimated interest income available and estimated liability on interest payment of the particular year. Assessment on above lines is made every year by the Central Board of Trustees, Employees’ Provident Fund before recommending rate of interest to the Government of India.

Actual details of expenditure for the year 2011-12 would be arrived only after updation of all the annual accounts of 2010-11.

Rate of interest for the year 2011-12 is to be recommended by the Central Board of Trustees, Employees’ Provident Fund based on both estimated interest income and estimated liability on interest payment to the Provident Fund members.

This information was given by the Minister of Labour and Employment Shri Mallikarjun Kharge in reply in reply to a written question in the Lok Sabha today.


Thursday, November 24, 2011


Post office savings,PPF to fetch better returns from Dec 1

PPF account holders, small depositors and persons keeping money in the schemes operated by post offices, will get higher rate of return from December 1, 2011.

The government today notified increase in interest rates on public provident fund (PPF) to 8.6 per cent from 8 per cent now, and also raised ceiling on annual contributions to the fund to Rs one lakh from Rs 70,000.

Interest rates on savings account in post offices would also go up to 4 per cent from 3.5 per cent at present. Similarly, interest rates on deposits of other maturities too would be raised from December.

Further, the sale of Kisan Vikas Patras (KVP) will be discontinued from November 30. There was an apprehension about KVP, which was kind of a bearer instrument, that it was used for money laundering.

In addition, the maturity period of monthly investment schemes (MIS) and national savings certificates would be reduced from six to five years.

MIS would earn an interest of 8.2 per cent, but accounts opened on/after December 1 would not be entitled for bonus.


Monday, June 06, 2011

Payment of interest in respect of PPF (HUF) accounts.

F.No.7/4/2008-NS II
Ministry of Finance
Department of Economic Affairs
(Budget Division)

New Delhi, the 1st June, 2011.

   The CGM (DGBA),
   Reserve Bank of India,
   Department of Government & Bank Accounts,
   Central Office, Byculla Office Building,
   4th Floor, Opp. Mumbai Central Railway Station,
   Byculla, Mumbai-400008.

Sub:- Payment of interest in respect of PPF (HUF) accounts.


   I am directed to say that as per the provisions contained in Public Provident Fund (PPF) Scheme, 1968, prior to 13th May, 2005 accounts could be opened by individuals and on behalf of HUFs. With effect from 13th May, 2005 opening of PPF accounts has been restricted to “individuals” only. In this regard, a clarification was issued by Finance Ministry vide letter No. F.2/8/2005-NS II dated 20.5.2005 intimating that PPF accounts of HUFs shall continue till maturity and deposits/withdrawals in/from these accounts shall be allowed to be made in accordance with the rules of the scheme. However, any extension of existing accounts shall be subject to the amendment dated 13th May, 2005.

   2. As per Paragraph 9(3) of PPF Scheme, 1968 a subscriber to the account, any time after the expiry of 15 years from the end of the year in which the initial subscription was made, if he so desires, can apply for withdrawal of the entire balance standing to his credit. Further, as per proviso below Paragraph 9(3), the subscriber may, if he so desires, make withdrawal of the amount standing to his credit from time to time in installments not exceeding one in a year.

   3. An amendment has been made to PPF Scheme, 1968 vide this Ministry’s Notification No. G.S.R. 956(E) dated 7th December, 2010. A new Proviso below Sub Paragraph 3 of Paragraph 9 of PPF Scheme, 1968 has been inserted, according to which PPF accounts opened On behalf of HUFs prior to 13th May, 2005 shall be closed after expiry of 15 years from the end of the year in which initial subscription was made. In respect of those HUF accounts where the initial period of 15 years had already been completed prior to the issue of Notification dated 7.12.2010, such accounts were to be closed on 31st March 2011.

   4. Some of the subscribers of PPF (HUF) accounts had closed the accounts on maturity or thereafter between 13th May, 2005 to 7.12.2010 (before the issue of the aforesaid amendment). Some of such account holders, were not paid interest at PPF rates on the deposits retained beyond the maturity period (without further subscriptions). Those subscribers had been representing that interest at PPF rate may also be paid to them on the deposits that were retained in PPF accounts beyond maturity period. The matter has been examined in this Ministry and it has been decided that interest at PPF rate would be paid on those PPF (HUF) accounts, which had attained the maturity after 13.5.2005 but closed by the subscribers before 7.12.2010,subject to the conditions that the accounts had not been extended thereafter and the deposits were retained in such accounts without further subscriptions.

   5. The above decision may be circulated to all concerned for compliance.

   6. This issues with the approval of Secretary (EA).

Yours faithfully,
(M.A. Khan)
Under Secretary the Govt. of India