PPF Scheme 2019 | Key Highlights

Public Provident Fund, PPF Scheme 2019

Introduction

Government of India notified Public Provident Fund, PPF Scheme 2019, with new PPF rules, on 12th December 2019, thus replacing earlier PPF Scheme 1968. While most provisions are part of existing rule manual, the recent notification has introduced new modifications.

PPF Scheme 2019 | Key Highlights

1. Interest on Loan against PPF reduced by 1%

• A loan against your PPF deposits is another option to meet short-term liquidity needs.
• According to the earlier PPF Scheme 1968, if you took a loan against your PPF account, the laid down interest rate was 2% per annum above the prevailing PPF interest rate. For example, if the PPF interest rate is 7.9%, your would have to pay an interest rate of 9.9%.
• PPF Scheme 2019 has reduced this interest rate for loan against PPF to 1%. Hence if the PPF interest rate is 7.9%, you would have to pay a rate of 8.9% if you take a loan against PPF.
• 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.

2. Deposits

• PPF Scheme 1968 allowed deposits to be made in multiples of 5 and a maximum of 12 deposits in a period of 1 year.
• PPF Scheme 2019 allows deposits in multiples of R.50. No upper limit on number of deposits has been specified. In other words you can make deposits to the PPF account as many times as you want, subject to the maximum limit.
• The requirement of minimum annual contribution of ₹500 and the maximum annual contribution of ₹1.5 lakh have been retained, as is.
• Thus, we can open a PPF account with a minimum initial deposit of Rs.500 and thereafter new scheme allows deposit of any sum in multiples of Rs.50.

3. Premature Closure

• Government of India, in 2016 allowed premature closure of PPF account. In PPF Scheme 2019, premature closure is allowed after completion of 5 financial years after opening of PPF A/c, as it was earlier.
• Special Form 5 has been created for Premature Closure under the new Scheme 2019.
• In case of Premature Closure of PPF account,
  • Realised interest rate = PPF rate – 1%
• Premature Closure is allowed on the Grounds of :
  1. Serious ailments / Life threatening diseases affecting account holders, spouse, dependent children or parents on production of supporting documents and medical reports confirming such disease from treating medical authority
  2. Higher Education of Account holder as well as dependent children on production of documents and fee bills in confirmation of admission in a recognized institute of higher education in India or abroad
  3. Change in Residency status of account holder on production of copy of Passport and visa or Income tax return