Changes In PPF, NSC Rules: Here Are 5 Things Smart Investor Need To Know

Although we are investing in the high earning financial instruments like Blue chip / Multibagger  stocks and Mutual funds with high returns; PPF or public provident fund has remained one of the most top investment options in India because of the various features such as tax-free interest income, tax exemption, and risk-free investment. 

Government regulate the PPF rules time to time; which were updated recently. If you are holding PPF account this post is for you; as per recent Ministry of Finance notification on PPF dated 13th Feb 2018, Finance ministry has proposed an expansion in the scope of benefit for PPF scheme.

What is Proposed ? 

With this notification it is proposed to have single 'Government Saving Promotion Act'  for NSC and PPF scheme instead of various separate acts like Government Savings Certificate Act, 1959, Public Provident Fund Act, 1968 and Government Savings Bank Act, 1873. Presently, there are multiple acts with respect to Small Saving Schemes which sometimes creates confusion among investors.

Effect on Revised Notification On PPF 

With this revised notification government has kept all the benefits as it is and none of the benefits available to the investors under the present PPF Act have withdrawn or amended. Keep smiling as you will continue to earn tax-free interest income and tax exemption.

5 Things Smart Investor Need to Know 

1. Premature Closure Before 5 Years of Completion : With the current PPF rule, PPF account can’t be closed prematurely before completion of five financial years. This restriction is proposed to be relaxed and PPF account holder will be allowed to close PPF account but only in case of exigencies like a medical emergency, higher education etc.
2. Associated Rights for Minor : For PPF accounts opened by the guardian in the name of the minor, the guardian would also enjoy associated rights and responsibilities.In order to promote a culture of saving among children, clear provision is made regarding deposit made by minors. In the present act provision about the operation of an account in the name of the minor or differently abled person is not available. The new act covers relevant rules in this regard.
3. Clear Definition To Rights of Nominee : The new act defines rights of nominee more clearly. This will help in faster claim settlement and also reduce disputes.
4. Nominee for Minor Account : At present, there is no facility of defining nominee in case account is opened in the name of the minor. Further, existing Acts say that if account holder dies and there is no nomination and amount is more than prescribed limit, the amount shall be paid to legal heirs. In this case, the guardian has to obtain succession certificate. To remove this inconvenience, provisions for a nomination with regard to an account opened in the name of minors have been incorporated. Further, the provision has been made that if the minor dies and there is no nomination, the balances shall be paid to the guardian.
5. Focus On Customer Service with Grievance Redressal :The current act is silent about grievance redressal. The new act will ensure the provision of strong grievance redressal system so that dispute can be settled quickly.

Although new PPF Rules notification clearly specify that no changes are made with respect to interest rate or tax policy on small savings scheme and PPF and NSC will continue to fetch an interest rate of 7.8 per cent while Post Office savings account get 4 per cent. Under the new rules issued by the government, these investments will be deemed to be closed on the day the investor becomes a non-resident ie. NRI. Subsequently, the investor will be paid interest at the much lower post office savings account rate at 4% p.a

These changes are in proposal and not implemented. Do comment your thoughts on new notification of PPF.