New PPF account rules effective October 1: Investors need to take immediate action

The finance ministry’s recent tweaks to the guidelines governing National Small Savings Schemes accounts opened through post offices are set to kick in from October 1. They allow for the regularisation of irregular accounts—those that were opened through post offices in contravention of rules. So, it’s important for investors to understand and take necessary action.

One significant change pertains to irregular Public Provident Fund (PPF) accounts opened for minors. For instance, if both parents opened PPF accounts in the name of their minor child, it would be considered irregular. Earlier, such accounts earned interest at the Post Office Savings Account (POSA) rate. Under the new guidelines, these accounts will earn POSA interest until the minor turns 18. Then, the account will be eligible for the regular PPF interest rate.

Saraswathi Kasturirangan, Partner at professional services firm Deloitte India, says while regular PPF accounts earn interest at the notified rate—7.1% at present—irregular accounts will earn the POSA interest rate—4% at present—until the minor turns 18.

Another big change pertains to NRI PPF accounts opened without specifying residency status. These, too, will earn POSA interest until September 30. After that, they will not earn any interest.

Bhagwati Tiwari, a Delhi-based employment lawyer, says before the new PPF Scheme was introduced in 2019, all account holders could use Form H to seek extension beyond maturity. Since that form did not ask applicants to disclose their residency status, many NRIs—who were residents while opening the account—either unknowingly or improperly sought extension. “The new guidelines deem such accounts irregular and mandate that any NRI PPF accounts opened under the previous 1968 scheme and still active shall cease to earn any interest from October 1.” 

@imNavneetDubey