PPF and SSY: Investors of small savings schemes should note that there will be new rules applicable from October 1, 2024, which is the start 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 with details about the new rules that would be adopted to regularise irregularly opened accounts under National Small Savings (NSS) schemes via Post Offices.
The Ministry of Finance is the regulatory authority over small savings accounts. Any accounts found to be irregular must be directed to this division for the necessary regularisation by the Ministry of Finance, in compliance with the established rule.
The department has published six new regulations that are pertinent to investors in the National Savings Scheme, Public Provident Fund, and Sukanya Samriddhi Account. The guidelines have been categorized into the following sections:
> Irregular National Savings Scheme (NSS) accounts
> Public Provident Fund (PPF) accounts opened under a minor’s name
> Holding multiple PPF accounts
> Extension of a PPF account by a Non-Resident Indian (NRI)
> Regularisation of Sukanya Samriddhi Account (SSA) initiated by grandparents instead of guardians.
1) Irregular NSS accounts
This has been divided into three categories
> Two NSS-87 accounts opened prior to DG order
> Two NSS-87 accounts opened after DG order
> ln case of more than two NSS-87 accounts
>> Two NSS-87 accounts opened prior to DG Posts’ Order. No. 35- 19/9GSB- lll dated 02.04.1990:
(i). The earliest first opened account will get prevailing scheme rate.
(ii). The second account (opened after the first account) will get prevailing POSA rate plus 200 bps on the outstanding balance.
(iii). Points (i) and (ii) will be subject to the following conditions:
(a). Cumulative deposits in both the accounts put together should not exceed the applicable deposit limits for each year.
(b). Excess deposits (if any) shall be refunded to the investor without any interest.
(iv). Points (i) to (iii) are in the nature of one-time special dispensation allowed to investors of NSS-87 till 30 September 2024 from the date of OM dated 12th July 2024 issued by Ministry of Finance.
(v). From 1 Oct 2024 onwards, both the accounts will earn zero percent rate of interest.
>> Two NSS-87 accounts opened after DG Posts’ Order. No, 35- 19/90-SB-lll dated 02.04.1 990:
(i). The earliest first opened account will get the prevailing scheme
(ii). The second account (opened after the first account) will get prevailing POSA rate on the outstanding balance, (iii). Points (i) and (ii) are subject to the following conditions:
(a). Cumulative deposits in both accounts together should not exceed the applicable deposit limit for each year.
(b). Excess deposits (if any) shall be refunded without any interest to the investor.
(iv). Points (i) to (iii) are in the nature of one-time special dispensation to the investors of NSS-87 till 30 September 2024 from the date of OM dated 12th July 2024 issued by Ministry of Finance.
(v). From 1 Oct 2024 onwards, both the accounts will earn zero percent rate of interest.
>> ln case of more than two NSS-87 accounts
Principles outlined for two accounts opened before/after DG Posts’ Order. No. 35-19/90-SB-lll dated 02.04.1990, shall apply. For the third account more irregular accounts, no interest shall be paid and the principal amount shall be refunded to the investor.
For PPF accounts
2. PPF account opened under the name of a minor:
(a). POSA interest shall be paid for such irregular accounts until the individual (minor) becomes eligible for opening of account, that is, the individual attains 18 years of age. Thereafter, the applicable interest rate will be paid.
(b). Maturity period for such accounts will be calculated from the date the minor becomes an adult, that is, the date from which the individual becomes eligible to open the account.
3. More than one PPF Account:
(a). The primary account shall earn the scheme rale of interest subject to the deposit being within the ceiling applicable for each year. (Primary Account is one of the two accounts chosen by the investor in any Post Otfice/ agency bank where the investor preters to continue with the account upon regularisation).
(b). The balance amount in the second account shall be merged with the first account subject to the primary account remaining within ttrd appriia6ie investment ceiling in each year. Post-merger, the primary account will continue to enjoy the prevailing scheme rate ot interest. Excess balance in the second account, if any, shall be refunded with Zero percent rate of interest.
(c). Any additional accounts beyond the primary and second account, shall earn zero percent rate of interest from the date of opening of that account.
4. Extension of PPF account by NRI
For only those active NRI’s PPF accounts opened under the Public Provident Fund Scheme (PPF), 1968, where Form H did not specifically ask the residency status of the account holder, POSA rate of interest shall be given to the account holder (lndian citizen who became NRI during the currency of Account) till 30th September 2024.Ihercaller, the said account shall earn zero percenl rate of interest.
For PPF and SSY
(5). Small Savings scheme account opened under the name of a minor (Except PPF and SSY)
Such irregular accounts may be regularised with simple interest. The interest rate for calculation of simple interest on the account should be the prevailing POSA rate.
For SSA holders
6. Regularization of Sukanya Samriddhi Account (SSA) opened by Grandparents, other than Guardian.
(a). ln case of accounts opened under the guardianship of grandparents (who are other than legal guardian), the guardianship shall be transferred to a person entitled under the law in force, that is, to the natural guardian (alive parents) or Legal Guardian.
(b). lt more than two accounts are opened in a family in violation ol Para 3 of Sukanya Samriddhi Account Scheme, 2019, then the irregular accounts shall be closed by treating it as account opened in contravention to the scheme guidelines.