What premature closure of Public Provident Fund means for you

Good news for subscribers of the public provident fund (PPF). You may soon be able to close your PPF account prematurely as the government is looking to provide flexibility to investors to deal with financial exigencies. On Tuesday, the finance ministry proposed changes in the Finance Bill, 2018 to allow premature closure of Public Provident Fund (PPF) accounts. Currently, premature closure of PPF account is allowed only under specific conditions such as expenditure towards medical treatment and higher education.

What this means to PPF subscribers

The Public Provident Fund (PPF) is one of the best methods to save on taxes and enjoy other long-term benefits. However, it has very strict and specific rules set down in relation to when an amount can be withdrawn from the account.

As of now, the PPF account can only be fully withdrawn on maturity from the date of creation, i.e in fifteen financial years. In cases of financial emergency, the subscriber can opt for partial withdrawals in order to meet emergency expenses.

When changes are implemented in the Finance Bill 2018, provisions will be included to make provisions for premature closure easier in respect of all schemes.

"The benefits of premature closure of small savings schemes may now be introduced to deal with medical emergencies, higher education needs, etc," the Ministry of Finance said in a statement.

The government has also plans to consolidate PPF Act under the proposed Government Savings Promotion Act. The government has said that "no existing benefits to depositors are proposed to be taken away through this process".

"The main objective in proposing a common Act is to make implementation easier for the depositors as they need not go through different rules and Acts for understanding the provision of various small saving schemes, and also to introduce certain flexibilities for the investors," the Finance Ministry said. The government has also said that apart from ensuring existing benefits, certain new benefits to the depositors have been proposed under the bill to merge Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873.

How to know about your PPF withdrawal status

Through internet banking: You can access information related to withdrawals by accessing your bank account through internet banking. Checking the claim status online is possible only in the banks, which accept online deposits.

For post office accounts: Visit your post office branch in person and file a request to know your PPF withdrawal status.

PPF Account
 

Maintained by the government, hence it’s highly reliable

Savings - Small to medium

Minimum deposit for account opening - Rs 100

Minimum yearly deposit - Rs 500

Maximum yearly deposit - Rs 1,50,000

Tax benefits - Investments up to Rs 1,50,000 are fully exempt from tax

Information source: Bank Bazaar

No change in interest rate or tax policy on small savings scheme is being made through this amendment, the government clarified. The interest rate on PPF accounts, like other small savings schemes, is reset on a quarterly basis. Currently, PPF accounts fetch an interest rate of 7.6 per cent (for January-March quarter).