Money-Wise: PPF undergoes major changes from Oct 1 in India. Will your savings be impacted?

The Public Provident Fund scheme is a go-toinvestment option, especially for the middle class who wish to enjoy its tax benefits and ensure a risk-free corpus after their retirement.

The investment yields decent returns and offers an exemption under income tax section 80(C). With the new changes introduced in the scheme by the Ministry of Finance, investors are now worried about how it will impact their savings and how much interest they will earn now.

In Money-Wise, this time we are trying to decode the new PPF rules and simplify the impact that it may have on some accounts.

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No interest above Rs 1.5 lakhs

As per the revised regulations, the PPF account holder can invest up to Rs 1.5 lakh every year. Those holding multiple PPF accounts will get interest on investments up to Rs 1.5 lakh across different accounts and any excess amount in other accounts will get zero interest till they are closed. For example, if the total invested money in two accounts is 1.7 lakh, interest will be paid on Rs 1.5 lakh and zero interest will be given on the rest of Rs 20,000.

Also Read:Small Savings Schemes new rules effective Oct 1: Everything you need to know

No multiple PPF accounts

Those having more than one PPF account will have to choose one primary account to incur interest. The other accounts will be closed and their invested amount will be refunded without any interest.

Minor PPF

In the case of minor PPF accounts, they will be applicable for the Post Office Savings Account (POSA) interest rate, which is 2.5 per cent, till the minor turns 18, after which standard PPF rates of 7.1 per cent will be applicable.

The Post Office will calculate the maturity period from the date the minor turns major and is eligible to open their own regular account.

If guardians of minors have opened multiple PPF accounts, they will have to ensure that the contributions made to each account are within the annual limit.

NRI PPF account

NRI with PPF accounts and Form H will be able to retain their accounts until maturity, however, they will get a POSA interest rate only till September 30 and no interest will be incurred in their account from October 1.

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This change will have the most impact on Indian nationals who changed their status to NRI after the activation of their PPF accounts.

Here's what you need to do

• All those with irregularities in their PPF accounts should regularise it as soon as possible to ensure that they do not lose their interest. Especially, those with multiple accounts need to look into it and decide on one account thatthey will operate in future.
• The capping of the investment limit of Rs 1.5 lakh every year does not appear as a major hurdle because investments in PPF are generally made with the thought of getting exemptions under income tax section 80(C) and the limit of this section is also Rs 1.5 lakh.
• Those who have become NRIs and still have PPF accounts must consider closing their accounts either in five-year intervals or at maturity.
• In the case of minor accounts, those with multiple PPFs need to be careful with investments and the investors must also consider the POSA rates applicable for minors till they turn 18.