Your PPF Account Might Soon Be Discontinued! Here’s What You Should Know
Even after decades of its launch, the Public Provident Fund (PPF) continues to be the most favored saving avenue among investors. The principal and the interest earned have a sovereign guarantee and the returns are tax-free.
The principal invested in the PPF qualifies for deduction under Section 80C of the Income Tax Act, 1961 and the interest earned is tax exempt as well under Section 10.
With interest rates on taxable income coming down, PPF remains a suitable alternative for allocating the debt portion of one’s investment portfolio.
PPF is a 15-year scheme, which can be extended indefinitely in block of 5 years. It can be opened in a designated post office or a bank branch. It can also be opened online with few banks. One can deposit a maximum of 12 times in a year.
Risk-wary people pin their hopes on a PPF account since it’s more secure from market volatility.
However, all this might come to an end. Buried deep within the many pages of the Finance Bill, 2018 is an important amendment that could have an impact on the way the Public Provident Fund (PPF) functions.
In the Finance Bill, a provision has been made to repeal the Public Provident Fund (PPF) Act, 1968. Once passed, it will stand repealed from the date when it is published in the official gazette
You shouldn’t be so worried. Your PPF will not be discontinued. The repeal essentially means that all small savings schemes including PPF will now be covered under the Government Savings Banks Act, 1873.
These schemes will now fall under the ambit of the Government Savings Banks Act: Post Office Savings Account, National Savings Monthly Income (Account), National Savings Recurring Deposit, Sukanya Samridhhi Account, National Savings Time Deposit (1 year, 2 years, 3 years and 5 years, Senior Citizens’ Savings Scheme, Savings Certificates, Kisan Vikas Patra , National Savings Certificates (VIII Issue) and Public Provident Fund Scheme.
The Finance Bill 2018 clearly states that the repeal of PPF Act will not change the financial structures.
The Bill states that all deposits made or accounts or certificates held under the repealed enactments shall be deemed to be deposits or holdings in the Savings Scheme The repeal will not affect the investors who made the deposits before the Finance Bill 2018.
The Bill, however, might change a vital advantage in PPF. Currently, PPF enjoys freedom from court attachment. This essentially means that the balance of the subscriber is not subject to attachment under any order or decree of a court in relation to any debt incurred by him.
This will change with the Bill. There is no provision under the Government Savings Banks act 1873 with respect to protection from attachment against any decree as was available under the PPF Act.