Here’s some good news for Public Provident Fund (PPF) account holders. In a move to make PPF and other small saving schemes more investor-friendly, the government has proposed to allow premature closure of PPF accounts and permit opening of small savings accounts in the name of minors.
Due to the tax benefits offered under Section 80C, PPF investments continue to be a preferred instrument for saving among the middle class. At present, the PPF Act says a PPF account can’t be closed before completion of five financial years.
The Finance Ministry has proposed some changes to that in the Finance Bill, 2018, aiming to offer some new benefits to investors in small saving schemes.
1. The government has proposed to allow premature closure of small savings accounts including PPF to deal with medical emergencies, higher education needs, etc. At present, the PPF amount can’t be withdrawn before the completion of five financial years.
2. Investment under small savings schemes can be made by a guardian on behalf of a minor under the provisions proposed in the Finance Bill. The guardian may also be given associated rights and responsibilities.
3. Provisions have been made to allow operation of small savings accounts by physically infirm and differently-abled persons.
4. The proposals, if enacted, will allow the government to put in place a mechanism for redressal of grievances and for fraternal settlement of disputes related to PPF and small saving accounts. The existing act has no provision for grievance redressal.
5. There is a provision in the proposal to pay the balance to the guardian in the event of the death of a minor account-holder if there is no nomination.
6. Small savings schemes provide income tax benefits to the subscribers. The proposal calls for no changes in the interest rate or tax policy on small savings schemes.