PPF account: 5 recent rule changes you should know

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  • The government has relaxed a few rules on PPF and other small savings schemes due to the lockdown
  • Non-deposit of mandated minimum deposit in PPF account for the year 2019-20 will not attract any penalty if payment is made till June 30

Public provident fund or PPF has seen a sharp cut in interest rate cut for this quarter, along with those on other small savings schemes. The government also recently extended the date for making investment in PPF for claiming income tax deduction for 2019-20. Last fiscal the government had also tweaked a few rules for the benefit of PPF account holders. These were mostly procedural in nature. The PPF scheme has a maturity of 15 years.

Here are 5 things to know about new PPF rules:

1) After an 80-basis-point cut in interest rate for the April-June quarter, PPF still fetches 7.1% interest rate. PPF remains an attractive option for long term savings when interest rate on bank deposits are falling sharply. For example, the highest interest rate offered by SBI across all tenure of FDs is 5.7%.

2) Due to the 21-day lockdown, the government has extended the date for making various investment and payments for claiming income tax deduction for 2019-20 to June 30. This includes Section 80C (which also includes investment in PPF), 80D (health insurance) and 80G (donations). Hence the investment/payment can be made up to 30.06.2020 for claiming the deduction under these sections for FY 2019-20.

3) Also, non-deposit of mandated minimum deposit in PPF account for the year 2019-20 will not attract any penalty. PPF account holders can make the deposit till June 30 and no penalty/revival fee will be charged. This will be also be applicable for other small savings schemes.

“The subscribers of RD A/c/ SSA/ PPF A/c may deposit the mandated due amount, if any of Current FY (2019-20) and April, 2020 (as the case may be) in their respective accounts till 30th June, 2020 and no penalty/ revival fee shall be charged,” the Department of Posts said.

If a PPF account holder fails to deposit a minimum of ₹500 in any financial year, the account is treated as discontinued. It can be revived on payment of a fee of ₹50 along with arrears of minimum deposit of five hundred rupees for each year of default.

4) And for this deposit made till June 30, March 31, 2020 will be considered for the purpose of calculating interest or payment of interest.

5) According to changes made in the previous fiscal, now an account holder can make deposits in multiples of ₹50 any number of times in a financial year, with a maximum of a combined deposit of ₹1.5 lakh a year. Earlier, a maximum of 12 deposits were permitted in a period of one year into a PPF account. The government had reduced the interest rate charged on loan taken against PPF balance to 1% above the prevailing PPF rate from 2% earlier.

SOURCE: Live Mint