Recently Government notified the PPF rules by withdrawing the earlier notifications. This notification is called as PPF (Public Provident Fund) Scheme 2019 which removed the earlier notifications with respect to Public Provided Scheme 1968.Let us see the major changes that happened in this new PPF (Public Provident Fund) Scheme 2019.
PPF (Public Provident Fund) Scheme 2019 – 5 Important Changes
# Premature Closure is allowed for NRIs
When in the year 2016, PPF premature rules were announced, the Government introduced certain eligibility to opt for premature closure of the account and they are as below. (Refer my old post “Premature closure of PPF account – New Rules 2016
- Premature closure of the account is allowed in the event of the death of the account holder (This is the old rule and will continue).
- Premature closure of account is allowed in the event of serious ailments of holder, spouse, parents or children.
- Premature closure of the account is allowed in the event of the amount required for the higher education account holder or minor account holder.
However, with the new PPF (Public Provident Fund) Scheme 2019 rules, if the account holder turned NRI, then they are allowed to opt for premature closure. Refer the notification wordings “on change in residency status of the account holder on production of copy of Passport and visa or Income-tax return”. This facility of premature closure of account for NRIs will be available only after the completion of 5 years of period.
# Interest Rate on the PPF Loan is reduced
If you took a loan against your PPF Account, the PPF Scheme 1968 laid down an interest rate of 2% per annum above the prevailing PPF interest rate. For example, suppose the prevailing interest rate is 7.9%, then you used to pay the interest of 9.9% on your loan on PPF.This interest rate on PPF loan is reduced to 1% from the older 2%. Hence, if the prevailing interest rate is 7.9%, then the applicable interest rate on PPF loan is 8.9%. I think this is a big booster for many who can easily avail this rather than going for other forms of loans like a personal loan.In both cases, the interest is levied from the first day of the month in which the loan is taken to the last day of the month in which the last installment of the loan is paid.Refer to our earlier post on PPF Loan and Partial withdrawal “PPF-Loan and Withdrawal
# No upper limit on the number of deposits in a Financial Year
Earlier, the maximum number of deposits you are allowed to deposit in PPF is restricted to 12. The meaning of the year is FINANCIAL YEAR. In other words, you can make deposits to the PPF account as many times as you want, subject to the maximum limit.This gives a big booster and flexibility for many investors. Because if one has to fill Rs.1,50,000 a year, then his every contribution should be Rs.12,500 as he has to fill the maximum limit within 12 installments. With this change, PPF turned more flexible.
# Deposit in the multiple of Rs.50
Earlier the minimum deposit in a year was Rs.500 and thereafter in the multiple of Rs.5. This now increased to Rs.50. This change is required as there is no value for Rs.5. Hence, I think it is a good move.
# Change in the Forms
To streamline the process, the PPF(Public Provident Fund) Scheme 2019 rules changed the complete form structures and the new forms are as below.
- Account Opening Form-Form 1 (Earlier it was Form A)
- Contribution Form-Earlier it was Form B. However, nothing is specified under the new scheme.
- Partial withdrawals- Form 2 (Earlier it was Form C)
- Account closure after maturity: Form 3 (Earlier it was Form C)
- PPF Loan- Form 2 (Earlier it was Form D)
- Extension Form- Form 4 (Earlier it was Form H)
- Premature Closure: Form 5 (This was not specified earlier)
- Nomination-Form 1 (Earlier it was Form E)
Refer to the complete Government Notification HERE