New PPF Rules 2024: Key Changes from October 1, 2024

The Public Provident Fund (PPF) remains one of India’s most popular and secure long-term savings schemes, offering tax benefits and guaranteed returns. However, the Ministry of Finance has introduced new rules for PPF accounts, effective from October 1, 2024, that could impact PPF account holders, especially those with minor accounts, multiple PPF accounts, or Non-Resident Indian (NRI) accounts.

These changes were detailed in a circular released on August 21, 2024, with the objective of streamlining the management of irregular PPF accounts.

1. PPF Account for Minors

A significant change impacts PPF accounts opened under the name of minors. Previously, PPF accounts for minors earned the standard PPF interest rate throughout. However, under the new rules:

• Interest Rates for Irregular Accounts: If the account is considered irregular, it will earn the Post Office Savings Account (POSA) interest rate until the minor reaches 18 years of age.
• Maturity Period Adjustments: Once the minor reaches adulthood, the standard PPF interest rate will be applied, and the maturity period will now be recalculated from the date the minor turns 18, effectively resetting the timeline for the account’s maturity.

2. Multiple PPF Accounts

PPF accounts are limited to one account per person. However, some individuals may have opened more than one PPF account, leading to irregularities. The new rules address this scenario:

• Interest Earnings: The standard PPF scheme interest rate will only be earned on the primary account, provided that the deposits in this account remain within the yearly investment limit (currently ₹1.5 lakh).
• Account Merger: If a person holds two PPF accounts, the balance of the second account will be merged with the primary account. After regularisation, the primary account will continue to earn the scheme rate, and any excess amount in the secondary account will be returned without any interest.
• No Interest on Additional Accounts: All PPF accounts apart from the primary and secondary accounts will not earn any interest from the date of their opening.

3. NRI PPF Account Extension

Previously, NRIs were allowed to continue holding and contributing to their PPF accounts even after acquiring non-resident status. However, the new rules limit this privilege:

• Interest Rate Changes: For NRIs holding PPF accounts, any active PPF account opened under the Public Provident Fund Scheme (PPF), 1968, will now earn the POSA rate of interest until September 30, 2024.
• Post-September 2024: From October 1, 2024, these PPF accounts will earn no interest whatsoever. This change impacts NRIs who became non-residents after the account was opened but who continued to hold these accounts without explicitly declaring their residency status.

Conclusion

These new rules, effective from October 1, 2024, aim to address irregularities in PPF accounts, especially those opened for minors, multiple accounts, and NRI extensions. It’s crucial for PPF account holders to be aware of these changes and regularise their accounts where necessary to avoid losing interest benefits.

Key Takeaways:

• PPF accounts for minors will earn POSA interest until the child reaches adulthood, after which the standard PPF interest applies.
• Multiple PPF accounts will only earn interest on the primary account, with excess balances returned without interest.
• NRI PPF accounts will stop earning any interest post-September 30, 2024.

By adhering to these guidelines, PPF investors can ensure their accounts remain in good standing and continue to earn optimal returns.