PPF and SSY: Investors in small savings schemes should note that new rules will be applicable from October 1, 2024, the beginning of the third quarter of the current financial year. Earlier this week, the Department of Economic Affairs under the Union Ministry of Finance issued a circular detailing the new rules to be introduced to regulate irregularly opened accounts under National Small Savings (NSS) schemes through post offices.
The Ministry of Finance is the regulatory authority for small savings accounts. All accounts in which irregularities are found must be submitted to this department for necessary adjustments by the Ministry of Finance in accordance with the established rules.
The department has issued six new regulations relevant to investors in the National Savings Scheme, Public Provident Fund and Sukanya Samriddhi Account. The guidelines have been divided into the following sections:
> Irregular National Savings Scheme (NSS) accounts
> Public Provident Fund (PPF) accounts opened in the name of a minor
> Maintain multiple PPF accounts
> Renewal of a PPF account by a non-resident Indian (NRI)
> Regularisation of Sukanya Samriddhi Account (SSA) by grandparents instead of guardians.
1) Irregular NSS accounts
This was divided into three categories
> Two NSS-87 accounts were opened before the DG order
> Two NSS-87 accounts opened following DG order
> If you have more than two NSS-87 accounts
>> Two NSS-87 accounts opened before the General Directorate of Post Order No. 35-19/9GSB-lll of 02.04.1990:
(i) The applicable tariff applies to the account first opened.
(ii) The second account (opened after the first account) will be subject to the applicable POSA rate plus 200 basis points on the outstanding balance.
(iii) Items (i) and (ii) are subject to the following conditions:
(a) The cumulative deposits in both accounts together shall not exceed the applicable deposit limits for the relevant year.
(b) Any excess deposit will be refunded to the investor without interest.
(iv) Items (i) to (iii) shall be in the nature of a one-time special arrangement for investors of NSS-87 until 30 September 2024 from the date of the OM dated 12 July 2024 issued by the Ministry of Finance.
(v) From October 1, 2024, the interest rate on both accounts will be zero percent.
>> Two NSS-87 accounts were opened following an order from the General Directorate of Post. No. 35-19/90-SB-lll dated 02.04.1990:
(i). The first account opened will receive the prevailing scheme
(ii) For the second account (opened after the first account), the applicable POSA rate will apply on the outstanding balance. (iii) For items (i) and (ii), the following conditions apply:
(a) The cumulative deposits in both accounts shall not exceed the applicable deposit amount per year.
(b) Any excess deposit will be refunded to the investor without interest.
(iv) Items (i) to (iii) shall be in the nature of a one-time special arrangement for the investors of NSS-87 until 30 September 2024 from the date of the OM dated 12 July 2024 issued by the Ministry of Finance.
(v) From October 1, 2024, the interest rate on both accounts will be zero percent.
>> If you have more than two NSS-87 accounts
The principles apply to two accounts opened before/after the General Directorate of Post Office Order No. 35-19/90-SB-lll of 02.04.1990. For the third account, which is less regularly maintained, no interest is paid and the capital amount is refunded to the investor.
For PPF accounts
2. PPF account opened in the name of a minor:
(a). POSA interest will be paid on such irregular accounts until the person (minor) becomes eligible to open an account, i.e. until he or she attains the age of 18 years, after which the applicable interest rate will be paid.
(b). The term of such accounts shall be calculated from the date on which the minor attains the age of majority, that is, from the date on which the person is entitled to open the account.
3. More than one PPF account:
(a). The main account will earn interest at the system rate provided that the deposit is within the limit applicable for the year. (The main account is one of the two accounts selected by the investor at a post office/agency bank where the investor wishes to continue the account after the account has been settled.)
(b). The balance of the second account will be merged with that of the first account, provided that the main account remains within the estimated investment limit each year. After the merger, the main account will continue to bear the applicable interest rate. Any surplus in the second account will be refunded at a 0% interest rate.
(c) For all accounts other than the main account and the secondary account, an interest rate of zero percent shall apply from the date of opening of the respective account.
4. Extension of PPF account by NRI
Only for the PPF accounts of active NRIs opened under the Public Provident Fund Scheme (PPF), 1968, where the account holder’s residency status was not explicitly asked for in Form H, the account holder (Indian citizen who became NRI during the tenure of the account) will be provided with POSA interest rate till September 30, 2024. Moreover, zero percent interest rate will be provided on the said account.
For PPF and SSY
(5) Small Savings Account opened in the name of a minor (except PPF and SSY)
Such irregular accounts may be settled with simple interest. The interest rate used to calculate the simple interest on the account should be the prevailing POSA rate.
For SSA holders
6. Regularization of Sukanya Samriddhi Account (SSA) opened by grandparents (excluding guardian).
(a) For accounts opened under the guardianship of grandparents (other than the legal guardians), guardianship shall be transferred to a person entitled thereto under applicable law, that is, the natural guardian (living parents) or the legal guardian.
(b). If more than two accounts are opened in a family in violation of para 3 of the Sukanya Samriddhi Account Scheme, 2019, the irregular accounts shall be closed by treating them as if they had been opened in violation of the rules of the Scheme.