Public Provident Fund ( PPF) was initially introduced in India in 1968, which is now overruled by the new scheme introduced by Central Government on 12th December, 2019 i.e Public Provident Fund Scheme, 2019 vide notification No. G.S.R. 915(E).

 As we all aware that the Public Provident Fund (PPF) is considered as most important and safe amongst all tax saving investments schemes.  This scheme is falls under the EEE category i.e Exempt, Exempt and Exempt which actually means if you invest in it, you will get a deduction u/s 80C on your income. Further, the interest you earn on it alongwith its maturity proceeds will be tax-free in the hand of investor.

Hence after looking into the importance and popularity of PPF scheme the latest changes and amendment from old scheme into new scheme is mentioned as under for ready reference of all the investors:

Comparison of Provision under PPF Scheme, 1968 and PPF Scheme, 2019

Particulars Provision under PPF Scheme, 1968 Provision under PPF Scheme, 2019
1. Who can and who cannot not open PPF Account
  • An individual may open an account by Application in Form A.
  • An individual may also open one account on behalf of each minor of whom he is the guardian
  • You can have only one PPF account in your name
  • Joint account shall not be opened under this Scheme
  • NRIs are not allowed to open an account (if a resident who opened an account under this scheme, subsequently becomes a non Resident during the currency of the maturity period, the account shall be deemed to be closed with effect from the day he becomes a non-resident and interest with effect from that date shall be paid at the rate applicable to the Post Office Saving Account up to the last day of the month preceding the month in which the account is actually closed)
  • An individual may open an account by Application in Form 1
  • An individual may also open one account on behalf of each minor or a person of unsound mind of whom he is the guardian
  • Only one account shall be opened in the name of a minor or a person of unsound mind
  • Joint account shall not be opened under this Scheme
  • NRIs are not allowed to open an account
2. Minimum and maximum deposit limit for PPF
  • The amount of initial subscription which shall be minimum of Rs.100/-
  • A minimum deposit of Rs. 500 must be made during one whole financial year.
  • The maximum that could be deposited is Rs. 1,50,000 in a financial year
  • Deposits could be in either one go or in flexible installments (in multiples of Rs. 100) provided you do not exceed 12 installments in one financial year
  • The amount of initial subscription which shall be minimum of Rs.500/-
  • A minimum deposit of Rs. 500 must be made during one whole financial year in multiple of fifty rupees
  • The maximum that could be deposited is Rs. 1,50,000 in a financial year
3. Interest
  • Interest at the rate, notified by the Central Government in the Official Gazette from time to time
  • Interest 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
  • Interest shall be credited to the account at the end of each year
  • Interest at the rate, notified by the Central Government in the Official Gazette from time to time
  • Interest 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
  • Interest shall be credited to the account at the end of each year
4. Loans under Public Provident Fund (PPF)
  • account holder can apply for the loan after completion of 2 year from the date of Initial subscription but before expiry of 5 years
  • Amount of such loans must not exceed 25% of the amount that stood to the account holder’s credit at the end of the second year immediately preceding the year in which the loan is applied for.
  • A fresh loan is not allowed when a previous loan or interest is outstanding.
  • Account holder can apply for the loan after completion of 2 year from the date of Initial subscription but before expiry of 5 years
  • Amount of such loans must not exceed 25% of the amount that stood to the account holder’s credit at the end of the second year immediately preceding the year in which the loan is applied for.
  • A fresh loan is not allowed when a previous loan or interest is outstanding.
  • An account holder shall be entitled for only one loan in a year
5. Repayment of loan and interest
  • 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 instalments.
  • After the principal amount of the loan is fully repaid, the account holder shall pay interest thereon in not more than two monthly instalments at the rate of 2% p.a. 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 instalment of the loan is repaid.
  • If the principal amount of loan is repaid in one lump sum then the Interest rate applicable will be 2% per annum and if the repayment is in installments then the interest rate will be 6% per annum
  • 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.
  • 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 instalments.
  • After the principal amount of the loan is fully repaid, the account holder shall pay interest thereon in not more than two monthly instalments at the rate of 1% p.a. 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 instalment of the loan is repaid.
  • 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 instalments then the interest rate will be 6% per annum
  • 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.       Withdrawal from account under PPF
  • 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 C, 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 less the amount of loan, if any, drawn by him and which remains to be repaid
  • the facility of withdrawal may be availed only once in a year
  • 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
  • the amount of loan outstanding, if any, along with interest shall be paid by the account holder before availing the facility of withdrawal
  • the facility of withdrawal may be availed only once in a year only from the accounts which have not become discontinued
7. Premature closure of account under PPF
  • An account holder shall be allowed premature closure of his account 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

(b) higher education of the account holder or dependent children

  • 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
  • In 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
  • An account holder shall be allowed premature closure of his account 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

(b) higher education of the account holder or dependent children

(c) on change in residency status of the account holder.

  • 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
  • In 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
8. Extension of account with deposits after maturity
  • 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 for a further block period of five years.
  • The option of extension of account shall be made by the account holder before expiry of one year from the maturity of the account.
  • Facility of partial withdrawal 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
  • 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 for a further block period of five years.
  • The option of extension of account shall be made by the account holder before expiry of one year from the maturity of the account.
  • Facility of partial withdrawal 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
9. Closure of account
  • 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 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
  • 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
  • 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 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
  • 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

Key Changes vide PPF Scheme, 2019 in Comparison to PPF Scheme, 1968

  • Now under new scheme, an individual may also open one account on behalf of a person of unsound mind of whom he is the guardian. This clause is not there in PPF scheme, 1968.
  • The amount of initial subscription under old scheme was Rs.100 which is now increased upto Rs. 500/-
  • In PPF scheme, 1968 deposits could be in either one go or in flexible instalments (in multiples of Rs. 100) provided you do not exceed 12 instalments in one financial year. But in new PPF scheme, 2019 there is no limit on total number of instalments in one financial year and deposits should be in multiples of Rs 50
  • The interest rate for repayment of loan in PPF Scheme, 1968 was 2% which is reduced upto 1% of principal amount.
  • In PPF Scheme, 1968, if the account holder has already obtained loan and further that person wants to opt for withdrawal before maturity the then in such situation the amount of withdrawal has to be reduced by the amount of loan, if any, drawn by him and which remains to be repaid.

Further, in PPF scheme, 2019, the withdrawal before maturity facility will be available to the account holder only if the amount of loan outstanding alongwith interest shall be paid by the him before availing the facility of withdrawal

  • Premature closure of account under PPF scheme, 2019 will now be allowed in case of change in residency status of the account holder which was earlier not allowed. In PPF scheme, 1968, if a resident who opened an account under this scheme, subsequently becomes a non-resident during the currency of the maturity period, the account shall be deemed to be closed with effect from the day he becomes a non-resident and interest with effect from that date shall be paid at the rate applicable to the Post Office Saving Account up to the last day of the month preceding the month in which the account is actually closed.

(Compiled by TaxGuru Team)

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