New PPF rules: Five recent changes you should know

• A few procedural rules on PPF deposit to account extension have been changed
• PPF accounts currently fetch an interest rate of 7.9%

The government had last year amended a few rules related to the popular small savings scheme PPF or public provident fund. These were mostly procedural in nature. Now, the Department of Posts has also changed the procedural rules. “The Public Provident Fund scheme is a statutory scheme of the central government framed under provisions of PPF Act 1968. This Act was repealed through chapter VIII of Finance Act 2018 and now this scheme is governed by Government Savings Promotion Act 1873 (amended from time time) and public Provident Funds Scheme Rules 2019,” Department of Posts said in a recent circular. PPF accounts currently fetch an interest rate of 7.9%.

Here are five things to know about new PPF rules:

1) PPF account can be extended after maturity for deposits within one year of the date of maturity of original PPF account or extended PPF account by submitting application in Form 4. Earlier, for extending PPF account, an investor had to submit Form H.

Similarly, PPF accounts can be retained after maturity without further deposits and the balance will continue to earn interest at the rate of PPF scheme notified by the government from time to time. In case the PPF account is retained without deposits, the account holder can make one withdrawal in each financial year.

2) Earlier, a maximum of 12 deposits were permitted in a period of one year into a PPF account. But now an account holder can make deposits in multiples of ₹50 any number of times in a financial year, with a maximum of a combined deposit of ₹1.5 lakh a year.

3) PPF account can be closed prematurely on change in residency status of the account holder on production of copy of passport and visa or income tax return. Earlier, the government allowed premature closure of PPF account only under specific circumstances: If funds were needed for medical treatment and higher education only after five years after account opening.

4) A PPF account holder can apply for loan between third to sixth financial year of opening an account. The government had reduced the interest rate charged on loan taken against PPF balance to 1% above the prevailing PPF rate from 2% earlier.

5) A PPF account holder has to repay the loan before 36 months. Where the loan is not repaid or is repaid only in part, the penal interest will be charged at the rate of 6% per annum, Department of Post said in the circular.