The Department of Economic Affairs (DEA), under the Ministry of Finance (MoF), has issued 6 new regulations that are related to investors in Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), and other Small Savings Scheme (SSS). These new rules will come into effect from 1st October, 2024.
- These new rules have been adopted with the objective of regularizing irregularly opened accounts under National Small Savings (NSS) through Post Office.
- These new regulations have been categorised into following sections such as: irregular NSS, PPF accounts opened under a minor’s name, holding various PPF accounts, extension of a PPF account by Non-Resident Indian (NRI), regularization of Sukanya Samriddhi Account (SSA) initiated by grandparents instead of guardians.
Key Changes:
Irregular NSS Accounts:
i.These accounts have been classified into 3 main categories, which are: Two NSS-87 accounts opened prior to DG order (i.e. before 2nd April, 1990); Two NSS-87 accounts opened after DG order; more than two NSS-87 accounts.
ii.For Two NSS accounts opened before DG order: The 1st account will earn the current scheme rate. While, the 2nd account, which was opened after the 1st one, will earn the prevailing Post Office Savings Account (POSA) rate with an additional 200 basis points (bps) i.e. 2% on the outstanding balance.
- The combined deposits in both the accounts put together should not exceed the applicable deposit limits for each year. In case, there are excess deposits will be refunded to the investor without any interest.
- Both these accounts will not earn any rate of interest, starting from 1st October, 2024.
- As per the Official Memorandum (OM) issued by MoF on 12th July 2024, these special provisions are a one-time concession granted to NSS-87 investors until 30th September, 2024.
iii.For Two NSS accounts opened after DG order: The 1st account that was opened will receive the interest rate as per the current scheme. While, the 2nd account, which was opened after the 1st account, will earn the prevailing Post Office Savings Account (POSA) rate on the outstanding balance.
- The combined deposits in both the accounts put together should not exceed the applicable deposit limits for each year. In case, there are excess deposits, will be refunded to the investor without any interest.
- Both these accounts will earn 0% rate of interest, starting from 1st October, 2024.
iv.More than two NSS-87 accounts: No interest rate will be paid on the 3rd and subsequent accounts. The principal amount will be refunded.
v.PPF account opened under the name of a minor: POSA interest rate will be paid for such irregular accounts until the minor reaches the age of 18( the age eligible for opening of an account). Thereafter, the applicable interest rate will be paid.
- Maturity period for such accounts will be calculated from the date the minor becomes an adult i.e. the date from which the individual attains the age of the 18 which is eligible for opening the account.
vi.Multiple PPF Accounts: The primary account will earn the scheme rate of interest subject to the deposit being within the annual limit.
The balance amount in the secondary account will be merged with the primary account subject to the primary account remains within the applicable annual investment limit.
- Following the merger, the primary account will continue to earn the prevailing scheme interest rate.
- In case, there is any excess balance in the secondary account will be refunded with 0% rate of interest.
- Other than primary and secondary account, any additional account will not earn any rate of interest from the date of opening that account.
vii.NRI Extension of PPF Accounts: For only those active PPF accounts of NRI, which are opened under the Public Provident Fund Scheme (PPF), 1968, where Form H did not specifically ask the residency status of the account holder, will be eligible to receive the POSA rate of interest until 30th September, 2024.
- The account holder must be an Indian citizen who became an NRI during the account’s currency. Thereafter, the above mentioned account will earn 0% rate of interest.
viii.Small Savings Account Opened under Minor’s Name (Except PPF and SSY): Irregular accounts opened under the name of minor can be regularized with simple interest, calculated using the prevailing POSA rates as the rate of interest for the account.
ix.Regularisation of SSAs Opened by Grandparents instead of Guardian: SSAs opened by grandparents who are not legal guardian, must transfer guardianship to a legal guardian or natural parents.
- If a family has opened more than two SSAs, which is the violation of Para 3 of the SSY guidelines, then, such irregular accounts will be closed.
About Ministry of Finance (MoF):
Union Minister- Nirmala Sitharaman (Rajya Sabha- Karnataka)
Minister of State (MoS) – Pankaj Chaudhary (Constituency- Maharajganj, Uttar Pradesh (UP))
