Public Provident Fund Scheme, 2019- Detailed Analysis

Government has notified new Public Provident Fund Scheme, 2019 w.e.f. 12th December, 2019 vide notification No. G.S.R. 915(E). Article explains  Limits of number of PPF accounts under Public Provident Fund (PPF) Scheme, 2019, Limits of subscription under under Public Provident Fund (PPF) Scheme, 2019, Manner of making deposit under under Public Provident Fund (PPF) Scheme, 2019, Discontinuation of account under Public Provident Fund (PPF) Scheme, 2019, Interest on PPF,  Loans under PPF Scheme, 2019, Repayment of loan and interest under PPF ,  Withdrawal from PPF account, Closure of PPF account or continuation of PPF account without deposits after maturity, Extension of account with deposits after maturity under Public Provident Fund (PPF) Scheme, 2019, Premature closure of PPF account, Closure of account on death of the PPF account holder, Protection of credit balance from attachment under Public Provident Fund (PPF) Scheme, 2019, FORM – 1 Application for opening Public Provident Fund (PPF) Account, FORM – 2 Application for Loan/Withdrawal from PPF Account, FORM – 3 Application for closure of PPF Account, FORM – 4 Application for extension of PPF Account and FORM – 5 Application for premature closure of PPF Account.

A. Details of Public Provident Fund Scheme, 2019

1. Limits of number of accounts under Public Provident Fund (PPF) Scheme, 2019

(1) An individual may open an account by making an application in Form-1.

(2) An individual may also open one account on behalf of each minor or a person of unsound mind of whom he is the guardian:

Please note that the only one account shall be opened in the name of a minor or a person of unsound mind by any of the guardian.

(3) Joint account shall not be opened under this Scheme.

2. Limits of subscription under under Public Provident Fund (PPF) Scheme, 2019

(1) A deposit which shall not be less than five hundred rupees and not more than one lakh fifty thousand rupees in multiple of fifty rupees may be made in an account in a year.

(2) The maximum amount of investment in PPF account by an individual should not exceed Rs 1,50,000/- per annum including both the accounts i.e. in his own account and in account opened on behalf of the minor

3. Manner of making deposit under under Public Provident Fund (PPF) Scheme, 2019

(1) The account shall be opened with a minimum initial deposit of five hundred rupees and thereafter deposit of any sum in multiples of fifty rupees shall be made.

(2) The deposit in the account subject to the limits mentioned in paragraph 4 may be made in the account in one lump sum or in instalments.

4. Discontinuation of account under Public Provident Fund (PPF) Scheme, 2019

(1) Any account in which the account holder, having deposited five hundred rupees in the initial year, fails to deposit the minimum amount in the following years, shall be treated as discontinued.

(2) An account treated as discontinued as mentioned above, may be revived during its maturity period on payment of a fee of fifty rupees along with arrears of minimum deposit of five hundred rupees for each year of default.

Also, the balance in a discontinued account not revived by the account holder before its maturity shall continue to earn interest at the rate applicable to the Scheme from time to time.

(3) The account holder of a discontinued account shall not be eligible to open a new account before closure of such discontinued account after maturity:

Please note that the facility of loan and partial withdrawal shall not be allowed in such an account and the account holder shall be prohibited from opening another account in his name under this Scheme till final

(4) Facility of loan and partial withdrawal shall be allowed to regular accounts only as per the provisions of this Scheme.

(5) The total deposit in a year shall be inclusive of deposits made in respect of years of default of the preceding years but excluding the default fee.

5. Interest under Public Provident Fund (PPF) Scheme, 2019

(1) Interest at 7.9% per annum shall be eligible for a calendar month on the lowest balance at the credit of an account between the close of the fifth day and the end of the month.

(2) Interest shall be credited to the account at the end of each year.

(3) Interest shall be credited at the end of the year irrespective of the change of the account office due to transfer of the account during the year.

6. Loans under Public Provident Fund (PPF) Scheme, 2019

(1) This means the account holder can apply for the loan after completion of 2 year from the date of Initial subscription but before expiry of 5 years. Application must be file in Form 2 to the accounts office and for the amount which is less than or equal to 25% of total amount of credit balance in your account at the end of 2^nd year immediately preceding the year in which the loan is applied for

(2) In case of an account opened on behalf of a minor or a person of unsound mind, the guardian may apply for the loan for the benefit of the minor or the person of unsound mind by submitting the following certificate to the accounts office:

“Certified that the amount sought to be withdrawn is required for the use and welfare of Shri/Smt./Master/ Kumari………. who is a minor/ a person of unsound mind/a person incapable of operating his account due to physical infirmity and is alive on this……the day of…………..(month), ……….(year).”.

(3) An account holder shall not be entitled to get a fresh loan so long as earlier loan has not been repaid in full together with interest thereon.

(4) An account holder shall be entitled for only one loan in a year.

7. Repayment of loan and interest under Public Provident Fund (PPF) Scheme, 2019

(1) The principal amount of a loan shall be repaid by the account holder before the expiry of thirty-six months from the first day of the month following the month in which the loan is sanctioned.

Please note that the repayment may be made either in one lump sum or in installments.

(2) After the principal amount of the loan is fully repaid, the account holder shall pay interest thereon in not more than two monthly installments at the rate of one per cent. per annum of the principal for the period commencing from the first day of the month following the month in which the loan is drawn upto the last day of the month in which the last installment of the loan is repaid.

Further note that If the principal amount of loan is repaid in one lump sum then the Interest rate applicable will be 1% per annum and if the repayment is in installments then the interest rate will be 6% per annum from the first day of the month following the month in which the loan was obtained, to the last day of the month in which the loan is finally repaid

(3) The interest on the amount of loan outstanding and any portion of interest payable, but not paid, on any loan, the principal amount of which has already been repaid within the period of thirty-six months, may, on becoming due, be debited to the holder’s account.

(4) The interest recoverable shall accrue to the Central Government.

(5) The interest on outstanding loans which are not paid before the expiry of thirty-six months or paid partly shall be debited to the holder’s account at the end of each year.

(6) In case of death of the account holder, the nominee or legal heir shall be liable to pay interest on the loan availed by the account holder but not repaid before his death. Such amount of due interest shall be adjusted at the time of final closure of the account.

8. Withdrawal from account under Public Provident Fund (PPF) Scheme, 2019

(1) Any time after the expiry of five years from the end of the year in which the account was opened, the account holder may, avail withdrawal by applying in Form-2, from the balance to his credit, an amount not exceeding fifty per cent. of the amount that stood to his credit at the end of the fourth year immediately preceding the year of withdrawal or at the end of the preceding year, whichever is lower:

Provided that the amount of loan outstanding, if any, along with interest shall be paid by the account holder before availing the facility of withdrawal under this paragraph:

Provided further that the facility of withdrawal may be availed only once in a year only from the accounts which have not become discontinued.

(2) In case of an account opened on behalf of a minor, or a person of unsound mind, the guardian may apply for the withdrawal for the benefit of the minor or a person of unsound mind by submitting the following certificate to the accounts office, namely:-

“Certified that the amount sought to be withdrawn is required for the use and welfare of Shri/Smt./Master/ Kumari………. who is a minor/ a person of unsound mind/ a person incapable of operating his account due to physical infirmity and is alive on this……the day of…………..(month), ……….(year).”.

9. Closure of account or continuation of account without deposits after maturity under Public Provident Fund (PPF) Scheme, 2019

(1) Any time after the expiry of fifteen years from the end of the year in which the account was opened, the account holder may apply in Form-3 to the accounts office for the closure of his account. The accounts office shall allow the withdrawal of the entire balance along with due interest up to the last day of the month preceding the month in which the account is closed.

(2) The account holder may retain his account after maturity without making any further deposits for any period and the balance in the account will continue to earn interest at the rate applicable to the Scheme.

The account holder may make one withdrawal, in each year, of any amount within the balance.

(3) Once the account is continued without deposits for more than a year, the account holder shall not have the option again to continue the account with deposits.

10. Extension of account with deposits after maturity under Public Provident Fund (PPF) Scheme, 2019

(1) The account holder on the expiry of fifteen years from the end of the year in which the account was opened, may extend his account and continue to make deposit under paragraph 4 for a further block period of five years by applying to the accounts office in Form-4.

(2) The option of extension of account shall be made by the account holder before expiry of one year from the maturity of the account.

Please note that an account opened on behalf of a minor or a person of unsound mind may be extended at the request of the guardian.

(3) No deposits can be made in the account, if the account holder fails to give his option to continue the account within one year from the date of maturity. Any deposit made in such account shall be treated as irregular and refunded by the accounts office immediately without any interest.

Also the balance in the account on the date of maturity shall continue to earn interest upto the end of the month preceding the month of closure.

(4) Facility of partial withdrawal under paragraph 10 of the Scheme shall be available to the account extended, subject to the condition that the total withdrawal during the block period of five years shall not exceed sixty per cent. of the balance at credit at the commencement of the block period.

Please note that the withdrawal, subject to the ceiling as specified above may be made either in a single or in yearly installments.

(5) The above mentioned all 4 points shall also apply on accounts after maturity on expiry of the each extended block period of five years.

(6) If the account is continued with deposits for one or more five block periods, the account holder may leave the account without deposits on completion of any block period and the account shall continue to earn interest till it is closed and the account holder may make one withdrawal every year from the account.

(7) An account holder who has given his option for the extension of the account for a period of five years shall not have the option to withdraw his request at a later stage.

11. Premature closure of account under Public Provident Fund (PPF) Scheme, 2019

(1) An account holder shall be allowed premature closure of his account or the account of a minor or person of unsound mind of whom is the guardian on an application to the accounts office in Form-5, on any of the following grounds:

(a) treatment of life threatening disease of the account holder, his spouse or dependent children or parents, on production of supporting documents and medical reports confirming such disease from treating medical authority;

(b) higher education of the account holder or dependent children on production of documents and fee bills in confirmation of admission in a recognised institute of higher education in India or abroad;

(c) on change in residency status of the account holder on production of copy of Passport and visa or Income tax return.

Please note that an account under this Scheme shall not be closed before the expiry of five years from the end of the year in which the account was opened

Also, the premature closure, interest in the account shall be allowed at a rate which shall be lower by one per cent than the rate at which interest has been credited in the account from time to time since the date of opening of the account, or the date of extension of the account, as the case may be.

12. Closure of account on death of the account holder under Public Provident Fund (PPF) Scheme, 2019

(1) In the event of the death of the account holder, the account shall be closed and the nominee or the legal heir shall not be allowed to continue the account.

(2) The balance in the account of the deceased account holder shall earn interest till the end of the month preceding the month in which the eligible balance is paid to the nominee or the legal heir, as the case may be.

13. Protection of credit balance from attachment under Public Provident Fund (PPF) Scheme, 2019

Amount standing to the credit of any account holder shall not be liable to attachment under any order or decree of any court in respect of any debt or liability incurred by the account holder.

14. Application of General Rules under Public Provident Fund (PPF) Scheme, 2019

Provisions of the General Rules shall, so far as may be, apply in relation to the matters for which no provisions have been made in this Scheme.

15. Power to relax under Public Provident Fund (PPF) Scheme, 2019

Where the Central Government is satisfied that the operation of any of the provisions of this Scheme causes undue hardship to an account holder, it may, by order for reasons to be recorded in writing, relax the requirements of that provision or provisions in a manner not inconsistent with the provisions of the Act.

B. Summary of PPF related Forms

FORM – 1 Application for opening Public Provident Fund (PPF) Account

Following details need to be mentioned in this Form:

a) Photograph

b) Name of Applicant

c) Total initial deposit

d) PAN

e) Adhaar Number

f) Address

g) Contact Details

h) KYC details

i) Nominee details

FORM – 2 Application for Loan/Withdrawal from PPF Account

Following details need to be mentioned in this Form:

a) Name of Applicant

b) Account Number

c) Amount of Loan

FORM – 3 Application for closure of PPF Account

Following details need to be mentioned in this Form:

a) Name of Applicant

b) Account Number

c) Date of Maturity

FORM – 4 Application for extension of PPF Account

Following details need to be mentioned in this Form:

a) Name of Applicant

b) Account Number

c) Date of Maturity

FORM – 5 Application for premature closure of PPF Account

Following details need to be mentioned in this Form:

a) Name of Applicant

b) Account Number