New Guidelines From Oct 1, 2024, to Regularise 3 Types of Irregular PPF Accounts

The Public Provident Fund (PPF) is a centrally sponsored savings-cum-investment program renowned for its investor-friendly characteristics and long-term rewards. Under the Income Tax Act of 1961, the principal, interest, and maturity amounts will all remain tax-free because the scheme is classified as EEE (exempt-exempt-exempt).

Over the years, the PPF regulations have undergone multiple revisions by the Centre. The Department of Economic Affairs also issued a circular announcing significant adjustments to the PPF standards last month under the Ministry of Finance. Starting October 1, 2024, the Postal Savings Fund (PSF) regulations will be altered to address issues including children opening PPF accounts, individuals holding multiple PPF accounts, and Non-Resident Indians (NRIs) extending their PPF accounts through the post office's National Savings Schemes.

"The powers to regularise irregular small savings accounts are vested with the Ministry of Finance," states a circular printed by the ministry on August 21, 2024. As a result, the Ministry of Finance should refer all situations involving unusual accounts to this department for reconciliation.

Establishing a PPF Account in a Minor’s Name

Post Office Savings Account (POSA) interest will be paid on these types of irregular accounts until the person (minor) turns 18 and can start an account legally. Following that, the relevant interest rate will be settled.

The date the minor attains legal adult status or the date the person becomes eligible to open the account, shall be used to determine the maturity period for such accounts.

Two or More PPF Accounts

Assuming the deposit stays within the annual ceiling, the principal account will earn interest at the scheme rate. (An investor's preferred account at any Post Office or agency bank where they wish to maintain their holdings after regularisation is known as the "Primary Account").

So long as the main account doesn't go over the annual investment limit, the funds in the second account can be combined with the first. Even after the merger, the main account will keep earning interest at the current scheme rate. There will be no interest charged on any refunds made to the second account if there is an excess balance.

From the date of opening, any additional accounts beyond the primary and second accounts will earn zero percent interest.

Account Extension for Non-resident Indians

The account holder, who is an Indian citizen who became an NRI during the duration of the account, will be granted the POSA rate of interest until 30th September 2024, provided that their PPF account was opened under the Public Provident Fund Scheme (PPF), 1968 and Form H did not specifically ask about the account holder's residency status. After then, the interest rate on such an account will be zero percent.

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