The government proposes to allow premature closure of Public Provident Fund (PPF) accounts and permit opening of small savings accounts in the name of minor, the finance ministry said on Tuesday.
The legislative changes proposed in the Finance Bill, 2018, are aimed at adding flexibility in operation of the account under Small Savings Schemes (SSS), it said.
Dismissing concerns, the ministry said that all existing protections have been retained while consolidating the PPF Act under the proposed Government Savings Promotion Act.
“No existing benefits to depositors are proposed to be taken away through this process,” it said, adding that the proposal is to merge Government Savings Certificates Act, 1959, and Public Provident Fund Act, 1968, with the Government Savings Banks Act, 1873.
It further said that apart from ensuring existing benefits, certain new benefits to the depositors have been proposed under the bill.
“The main objective in proposing a common Act is to make implementation easier for the depositors as they need not go through different rules and Acts for understanding the provision of various SSS, and also to introduce certain flexibilities for the investors,” it said.
In order to remove existing ambiguities due to multiple Acts and rules for SSS and further strengthen the objective of ‘minimum government, maximum governance’, the government has proposed merger of the two laws with the Government Savings Banks Act, 1873, the ministry said.
Benefits of premature closure of SSS would be introduced to deal with medical emergencies, and higher education needs among others, it said.
“Another benefit, investment in SSS can be made by guardian on behalf of minor(s) under the provisions made in proposed Bill,” the release said.
Apart from ensuring existing benefits, certain “new benefits” to the depositors have been proposed under the Bill.
Bill also proposes permitting depositor to close PPF account before five years in exigencies.
“To make provisions for premature closure easier in respect of all schemes, provisions could now be made through specific scheme notification,” the ministry said.
Currently, the PPF account cannot be closed prematurely before completion of five financial years.
The amended law would also allow the government to put in place mechanism for redressal of grievances and for amicable and expeditious settlement of disputes relating to small savings.
Apart from offering higher interest rates compared to bank deposits, some of the SSS also enjoy income tax benefits.
“No change in interest rate or tax policy on small savings scheme is being made through this amendment. Apprehension that certain SSS would be closed is also without basis,” the ministry added.
SSS include Post Office Savings Account, National Savings Monthly Income (Account), National Savings Recurring Deposit, PPF, and Sukanya Samriddhi Account.