The Public Provident Fund (PPF) is a favoured savings instrument for many Indians,
thanks to its tax benefits and secure nature. However, when it comes to Non-Resident Indians (NRIs) and PPF, there’s a cloud of misconceptions that often leads to confusion. Let’s debunk some of these myths:

• Misconception: Many believe that NRIs are not allowed to open new PPF
  accounts.
• Reality: NRIs cannot open a new PPF account. However, if they had a PPF
  account before becoming an NRI, they could continue to maintain it until maturity.

1. PPF Accounts of NRIs Get Closed Automatically:

• Misconception: Once an individual becomes an NRI, their PPF account is
  automatically closed.
• Reality: The PPF account does not close automatically. It remains operational
  until maturity but operates with certain restrictions.

1. NRIs Can Continue to Invest in Existing PPF Accounts:

• Misconception: NRIs can keep investing in their existing PPF accounts without
  any issues.
• Reality: While the account remains active, NRIs cannot make fresh contributions
  to their PPF account once they attain NRI status.

1. PPF Withdrawals are Taxable for NRIs:

• Misconception: The amount withdrawn from PPF by NRIs is taxable.
• Reality: PPF withdrawals remain tax-free in India, irrespective of one’s residential
  status. However, NRIs should check the tax implications in their country of
  residence.

1. NRIs Can Extend Their PPF Account Beyond Maturity:

• Misconception: Like resident Indians, NRIs can also extend their PPF accounts
  beyond the 15-year maturity period.
• Reality: NRIs cannot extend their PPF accounts. Once the account matures, they
  must withdraw the entire amount.

PPF Interest Rates are Different for NRIs:

Misconception: NRIs receive a different (often believed to be lower) interest rate on their PPF accounts.

Reality: The interest rate for PPF is the same for both residents and NRIs. It’s set by the Indian government and is subject to periodic revisions.

Frequently Asked Questions (FAQs) about PPF for NRIs

Q1. Can NRIs open a new PPF account in India?
No, NRIs cannot open a new PPF account. However, if they had one before becoming an NRI, they can continue to maintain it.

Q2. What happens to my existing PPF account if I become an NRI?
You can continue to maintain your existing PPF account until its maturity. However, you cannot extend it beyond the maturity period.

Q3. Are the PPF returns for NRIs taxable in their country of residence?
Tax implications vary by country. It’s advisable to consult a local tax expert regarding the tax treatment of PPF returns in your country of residence.

Q4. Can NRIs withdraw from their PPF account?
Yes, NRIs can make withdrawals, subject to the standard PPF withdrawal rules.

Q5. Is the interest earned on PPF accounts tax-free for NRIs in India?
Yes, the interest earned is tax-free in India, but it’s essential to check the tax implications in the NRI’s country of residence.

Q6. Can NRIs deposit in their PPF account from their NRE or NRO account?
Yes, NRIs can deposit in their PPF account from their NRO account. However, deposits from NRE accounts are not allowed.

Q7. What is the current interest rate on PPF for NRIs?
The interest rate for NRIs is the same as for resident Indians and is revised quarterly.

Q8. Can NRIs extend their PPF account after maturity?

No, NRIs cannot extend their PPF account after maturity, even if it was opened before they attained NRI status.

Q9. Is there a penalty for not depositing the minimum amount in the PPF account?
Yes, a nominal penalty is charged if you don’t deposit the minimum required amount
in a financial year.

Q10. Can NRIs take a loan against their PPF account?
Yes, NRIs can avail loans against their PPF account, subject to the standard PPF
loan provisions.

Q11. How is the interest on PPF calculated for NRIs?
The interest calculation for NRIs is the same as for resident Indians, calculated monthly and credited annually.

Q12. Can I transfer my PPF account to another branch or bank?
Yes, PPF accounts can be transferred between branches or banks.

Q13. Do NRIs need to change the status of their PPF account after becoming an NRI?
No, there’s no need to change the account status. However, certain features and
benefits might be restricted.

Q14. Is a nomination facility available for NRI’s PPF account?
Yes, NRIs can nominate beneficiaries for their PPF account.

Q15. What happens to the PPF account if the account holder passes away?
The balance in the PPF account is paid to the nominee or the legal heir.

Q16. Can two NRIs jointly open a PPF account?
No, joint accounts are not allowed in PPF, whether for residents or NRIs.

Q17. Is the maturity amount from PPF repatriable for NRIs?
The maturity amount can be credited to the NRO account of the NRI, from which
repatriation is subject to certain conditions.

Q18. Can I change the nomination for my PPF account after becoming an NRI?

Yes, you can change the nomination for your PPF account anytime.

Q19. Are there any restrictions on deposit amounts for NRI PPF accounts?

The deposit limits for NRIs are the same as for resident Indians, with a minimum of INR 500 and a maximum of INR 1.5 lakhs in a financial year.

Q20. Can I convert my regular PPF account to an NRI PPF account?

There’s no separate NRI PPF account. If you had a PPF account before becoming an NRI, you could continue it till maturity but with certain restrictions.Rules Governing PPF Accounts for NRIs

The Public Provident Fund (PPF) has long been a popular savings instrument in India, offering attractive interest rates and tax benefits. However, for Non-Resident Indians (NRIs), the rules surrounding PPF accounts have undergone changes, making it essential to be updated. Here’s a comprehensive look at the regulations governing PPF accounts for NRIs:

Account Opening: NRIs ARE not allowed to open A new PPF account. However, if an individual had opened a PPF account while they were a resident of India and later changed their status to NRI, the account could be continued until its maturity.

Account Tenure: The standard PPF account has a tenure of 15 years. For NRIs who had opened their PPF account before becoming an NRI, they can’t extend the account beyond this tenure. Once matured, the funds remain locked and earn interest, but additional contributions aren’t allowed.

Interest Rate: The interest rate for NRIs on PPF accounts is the same as that for resident Indians. It’s set quarterly by the Government of India. However, it’s worth noting that once a person’s status changes to NRI, the interest earned becomes taxable in many foreign countries, depending on the Double Taxation Avoidance Agreement (DTAA).

For example, Raj, who moved to Australia, might have to pay tax in Australia on the interest he earns from his PPF account in India, based on the DTAA between India and Australia.

Contribution Limits: The annual contribution limit for PPF accounts is INR 1.5 lakhs. This limit applies to both residents and NRIs. However, NRIs can’t operate the account or make contributions if the account has matured after 15 years.

Repatriation: The principal amount and interest in the PPF account are fully repatriable for NRIs. However, the process might require additional documentation to prove the change in residency status.

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SB Order No. 14/2022

F. No. FS- 13/7/2020-FS
Government of India
Ministry of Communications
Department of Posts
(FS Division)

Dak Bhawan, New Delhi -110001
Dated: 30.08.2022

To,
All Head of Circles / Regions

Subject: – Regarding introduction of the online account opening and closure through DOP Internet Banking for Public Provident Fund (PPF) Accounts.

Madam / Sir,

In line with providing more digital transaction facilities to POSB customers, the undersigned is directed to say that online account opening and closure for Public Provident Fund (PPF) have been introduced in DOP Internet Banking. Now DOP Internet Banking users can open and close their PPF account online. For more details kindly read FAQ available at link https://ebanking.indiapost.gov.in

2. The option for opening and closing of Public Provident Fund (PPF) account is available under the ‘General Services’ tab of DOP Internet Banking. Internet Banking user should follow the below prescribed procedure for opening and closure of PPF account:

(a) Procedure for opening of PPF Account:
➢ Login into DOP Internet Banking
➢ ‘General Services’
➢ ‘Service Requests’
➢ ‘New Requests’
➢ PPF Accounts – Open a PPF Account
➢ Deposit Amount (Enter Amount for which PPF account is to be opened minimum ₹500 or above in multiple of ₹ 50 upto ₹ 1,50,000/-
➢ Debit Account (Select linked PO Saving Account)
➢ Click on ‘Click Here’ to read terms and conditions and accept terms and conditions
➢ Submit online
➢ Enter Transaction Password
➢ Submit.
➢ View/Download Deposit Receipt.

Note: – (i) Log in again to view the details of PPF Account opened under ‘Accounts’.
(ii) PPF Account will be opened in the name of DOP Internet Banking user and nominee will be same as registered in linked PO Savings Account.

(b) Procedure for Closure of PPF Account:
➢ Login into DOP Internet Banking
➢ ‘General Services’
➢ ‘Service Requests’
➢ ‘New Requests’
➢ Closure of PPF Accounts
➢ Deposit Account (Select PPF Account to be closed)
➢ Credit Account (Select linked PO Saving Account)
➢ Submit online
➢ Enter Transaction Password
➢ Submit.
➢ View/Download Closure Receipt.

Note: – (i) Logout and login again to view the details of PPF Account closed.
(ii) Only matured account can be closed under this option.
(iii) As premature closure is allowed under specific conditions, for premature closure kindly submit account closure form, passbook and relevant documents at Post Office concerned.

3. It is requested to circulate these instructions to all post offices for information and guidance. Adequate promotion of this functionality is to be given for the benefit of POSB customers.
4. Hindi version of this SB order will be issued in due course.
5. This issues with the approval of the competent authority.

Yours Sincerely,
(Devendra Sharma)
Asst. Director (SB-II)

Download introduction of the online account opening and closure through DOP Internet Banking for Public Provident Fund (PPF) Accounts PDF

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PPF Scheme 2019

NOTIFICATION

New Delhi, the 12th December, 2019

G.S.R. 915(E).- In exercise of the powers conferred by section 3A of the Government Savings Promotion Act, 1873 (5 of 1873), the Central Government hereby makes the following Scheme, namely:-

1. Short title and commencement.-

(1) This Scheme may be called the Public Provident Fund Scheme, 2019.

(2) It shall come into force on the date of its publication in the Official Gazette.

2. Definitions.-

(1) In this Scheme, unless the context otherwise requires,-

(a) “account” means an account under this scheme;

(b) “account holder” means an individual in whose name the account is held;

(c) “Act” means the Government Savings Promotion Act, 1873 (5 of 1873);

(d) “Form” means forms appended to this Scheme;

(e) “General Rules” means the Government Savings Promotion General Rules, 2018;

(f) “year” means the financial year.

(2) Words and expressions used herein but not defined shall have the meanings respectively assigned to them in the Act and in the General Rules.

3. Limits of number of accounts.-

(1) An individual may open an account by making an application in Form-1.

(2) An individual may also open one account on behalf of each minor or a person of unsound mind of whom he is the guardian:

Provided that only one account shall be opened in the name of a minor or a person of unsound mind by any of the guardian.

(3) Joint account shall not be opened under this Scheme.

4. Limits of subscription.-

(1) A deposit which shall not be less than five hundred rupees and not more than one lakh fifty thousand rupees in multiple of fifty rupees may be made in an account in a year.

(2) Maximum limit of one lakh fifty thousand rupees as specified in sub-paragraph (1) by an individual shall be inclusive of the deposits made in his own account and in the account opened on behalf of the minor.

5. Manner of making deposit.-

(1) The account shall be opened with a minimum initial deposit of five hundred rupees and thereafter deposit of any sum in multiples of fifty rupees shall be made.

(2) The deposit in the account subject to the limits mentioned in paragraph 4 may be made in the account in one lump sum or in instalments.

6. Discontinuation of account.-

(1) Any account in which the account holder, having deposited five hundred rupees in the initial year, fails to deposit the minimum amount in the following years, shall be treated as discontinued.

(2) An account treated as discontinued under sub-paragraph (1), may be revived during its maturity period on payment of a fee of fifty rupees along with arrears of minimum deposit of five hundred rupees for each year of default:

Provided that the balance in a discontinued account not revived by the account holder before its maturity shall continue to earn interest at the rate applicable to the Scheme from time to time.

(3) The account holder of a discontinued account shall not be eligible to open a new account before closure of such discontinued account after maturity:
Provided that the facility of loan and partial withdrawal shall not be allowed in such an account and the account holder shall be prohibited from opening another account in his name under this Scheme till final closure of such account.

(4) Facility of loan and partial withdrawal shall be allowed to regular accounts only as per the provisions of this Scheme.

(5) The total deposit in a year as specified in paragraph 4, shall be inclusive of deposits made in respect of years of default of the preceding years but excluding the default fee.

7. Interest.-

(1) Interest at 7.9 per cent. per annum shall be eligible for a calendar month on the lowest balance at the credit of an account between the close of the fifth day and the end of the month.

(2) Interest shall be credited to the account at the end of each year.

(3) Interest shall be credited at the end of the year irrespective of the change of the account office due to transfer of the account during the year.

8. Loans.-

(1) At any time after the expiry of one year from the end of the year in which the initial subscription was made but before expiry of five years from the end of the year in which the initial subscription was made, the account holder may, apply in Form-2, to the accounts office for obtaining a loan consisting of a sum of whole rupees not exceeding twenty-five per cent. of the amount that stood to his credit at the end of the second year immediately preceding the year in which the loan is applied for.

(2) In case of an account opened on behalf of a minor or a person of unsound mind, the guardian may apply for the loan for the benefit of the minor or the person of unsound mind by submitting the following certificate to the accounts office, namely:-

“Certified that the amount sought to be withdrawn is required for the use and welfare of Shri/ Smt./ Master/ Kumari ……. who is a minor/ a person of unsound mind/ a person incapable of operating his account due to physical infirmity and is alive on this ……. the day of ……. (month), ……….(year).”

(3) An account holder shall not be entitled to get a fresh loan so long as earlier loan has not been repaid in full together with interest thereon.

(4) An account holder shall be entitled for only one loan in a year.

9. Repayment of loan and interest.-

(1) The principal amount of a loan shall be repaid by the account holder before the expiry of thirty-six months from the first day of the month following the month in which the loan is sanctioned:

Provided that the repayment may be made either in one lump sum or in instalments.

(2) After the principal amount of the loan is fully repaid, the account holder shall pay interest thereon in not more than two monthly instalments at the rate of one per cent. per annum of the principal for the period commencing from the first day of the month following the month in which the loan is drawn upto the last day of the month in which the last instalment of the loan is repaid:

Provided that where the loan is not repaid, or is repaid only in part, within a period of thirty-six months, interest on the amount of loan outstanding shall be charged at six per cent. per annum instead of at one per cent. per annum with effect from the first day of the month following the month in which the loan was obtained, to the last day of the month in which the loan is finally repaid.

32 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II -SEC. 3(i)]

(3) The interest on the amount of loan outstanding under the proviso to sub-paragraph (2) and any portion of interest payable, but not paid, on any loan, the principal amount of which has already been repaid within the period of thirty-six months, may, on becoming due, be debited to the holder’s account.

(4) The interest recoverable shall accrue to the Central Government.

(5) The interest on outstanding loans which are not paid before the expiry of thirty-six months or paid partly shall be debited to the holder’s account at the end of each year.

(6) In case of death of the account holder, the nominee or legal heir shall be liable to pay interest on the loan availed by the account holder but not repaid before his death. Such amount of due interest shall be adjusted at the time of final closure of the account.

10. Withdrawal from account.-

(1) Any time after the expiry of five years from the end of the year in which the account was opened, the account holder may, avail withdrawal by applying in Form-2, from the balance to his credit, an amount not exceeding fifty per cent. of the amount that stood to his credit at the end of the fourth year immediately preceding the year of withdrawal or at the end of the preceding year, whichever is lower:

Provided that the amount of loan outstanding, if any, along with interest shall be paid by the account holder before availing the facility of withdrawal under this paragraph:

Provided further that the facility of withdrawal may be availed only once in a year only from the accounts which have not become discontinued.

(2) In case of an account opened on behalf of a minor, or a person of unsound mind, the guardian may apply for the withdrawal for the benefit of the minor or a person of unsound mind by submitting the following certificate to the accounts office, namely:-

“Certified that the amount sought to be withdrawn is required for the use and welfare of Shri/Smt./Master/ Kumari……………………………. who is a minor/ a person of unsound mind/ a person incapable of operating his account due to physical infirmity and is alive on this……the day of…………..(month), ……….(year).”.

11. Closure of account or continuation of account without deposits after maturity.-

(1) Any time after the expiry of fifteen years from the end of the year in which the account was opened, the account holder may apply in Form-3 to the accounts office for the closure of his account. The accounts office shall allow the withdrawal of the entire balance along with due interest up to the last day of the month preceding the month in which the account is closed.

(2) The account holder may retain his account after maturity without making any further deposits for any period and the balance in the account will continue to earn interest at the rate applicable to the Scheme:

Provided that the account holder may make one withdrawal, in each year, of any amount within the balance.

(3) Once the account is continued without deposits for more than a year, the account holder shall not have the option again to continue the account with deposits.

12. Extension of account with deposits after maturity.-

(1) Subject to the provisions of paragraph 11, the account holder on the expiry of fifteen years from the end of the year in which the account was opened, may extend his account and continue to make deposit under paragraph 4 for a further block period of five years by applying to the accounts office in Form-4.

(2) The option of extension of account under sub-paragraph (1) shall be made by the account holder before expiry of one year from the maturity of the account:

Provided that an account opened on behalf of a minor or a person of unsound mind may be extended at the request of the guardian.

(3) No deposits can be made in the account, if the account holder fails to give his option to continue the account within one year from the date of maturity. Any deposit made in such account shall be treated as irregular and refunded by the accounts office immediately without any interest:

Provided that the balance in the account on the date of maturity shall continue to earn interest upto the end of the month preceeding the month of closure.

(4) Facility of partial withdrawal under paragraph 10 of the Scheme shall be available to the account extended under sub-paragraph (1), subject to the condition that the total withdrawal during the block period of five years shall not exceed sixty per cent. of the balance at credit at the commencement of the block period:

Provided that the withdrawal, subject to the ceiling as specified above may be made either in a single or in yearly instalments.

(5) Provisions of sub-paragraphs (1) to (4) shall also apply on accounts after maturity on expiry of the each extended block period of five years.

(6) If the account is continued with deposits for one or more five block periods, the account holder may leave the account without deposits on completion of any block period and the account shall continue to earn interest till it is closed and the account holder may make one withdrawal every year from the account.

(7) An account holder who has given his option for the extension of the account for a period of five years shall not have the option to withdraw his request at a later stage.

13. Premature closure of account.-

(1) An account holder shall be allowed premature closure of his account or the account of a minor or person of unsound mind of whom is the guardian on an application to the accounts office in Form-5, on any of the following grounds, namely:-

(a) treatment of life threatening disease of the account holder, his spouse or dependent children or parents, on production of supporting documents and medical reports confirming such disease from treating medical authority;

(b) higher education of the account holder, or dependent children on production of documents and fee bills in confirmation of admission in a recognised institute of higher education in India or abroad;

(c) on change in residency status of the account holder on production of copy of Passport and visa or Income- tax return:

Provided that an account under this Scheme shall not be closed before the expiry of five years from the end of the year in which the account was opened:

Provided further that on such premature closure, interest in the account shall be allowed at a rate which shall be lower by one per cent. than the rate at which interest has been credited in the account from time to time since the date of opening of the account, or the date of extension of the account, as the case may be.

14. Closure of account on death of the account holder.-

(1) In the event of the death of the account holder, the account shall be closed and the nominee or the legal heir shall not be allowed to continue the account.

(2) The balance in the account of the deceased account holder shall earn interest till the end of the month preceeding the month in which the eligible balance is paid to the nominee or the legal heir, as the case may be.

15. Protection of credit balance from attachment.–

Amount standing to the credit of any account holder shall not be liable to attachment under any order or decree of any court in respect of any debt or liability incurred by the account holder.

16. Application of General Rules.-

Provisions of the General Rules shall, so far as may be, apply in relation to the matters for which no provisions have been made in this Scheme.

17. Power to relax.-

Where the Central Government is satisfied that the operation of any of the provisions of this Scheme causes undue hardship to an account holder, it may, by order for reasons to be recorded in writing, relax the requirements of that provision or provisions in a manner not inconsistent with the provisions of the Act.

[F. No. 2/2/2018-NS (Pt. I)]
RAJAT KUMAR MISHRA, Jt. Secy

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22 Mar,2018

The revised Rates of Interest on various Small Savings Schemes Including Saving Deposits, Public Provident Fund, Kisan Vikas Patra and Sukanya Samriddhi Accounts Scheme for the 4th Quarter of financial year 2017-18 is as below:

This was stated by Shri Shiv Pratap Shukla, Minister of State for Finance in written reply to a question in Rajya Sabha.

Source : PIB

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No.CAIU/011(44)2016/Aadhar/10273

Date: 22 SEP 2017

To
All ACCs (Zones) including ACC (ASD),
All RPFC-I/ RPFC 11 (Regional Offices),
Sub: Aadhaar linking and interoperability of General Provident Fund (GPF), Public Provident Fund (PPF) and Employees Provident Fund (EPF) -regarding.

Sir,
Please find enclosed herewith a letter No.D-11011/36/2016-DBT (Cab.) dated 29.08.2017 received from Assistant Director, Cabinet Secretariat, DBT Mission forwarding therewith record of discussions of the meeting held under the Chairmanship of Joint Secretary, DBT Mission on 25.08.2017, wherein it has been directed that all the Departments should ensure 100% of Aadhaar seeding by December 31,2017.

2. It is requested to implement the instructions issued by the Cabinet Secretariat, DBT Mission, New Delhi for seeding of Aadhaar by December 31, 2017.
[This issues with the approval of ACC-II (CAIU)].

Yours faithfully,
Encl: As above
(A.K. Mandal)

Authority: www.efpindia.com

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In a move that will hit the common man, the government today slashed interest rates payable on small savings including PPF and Kisan Vikas Patra (KVP) in a bid to align them closer to market rates.

As a part of its February 16 decision to revise interest rates on small savings every quarter, the interest rate on Public Provident Fund (PPF) scheme will be cut to 8.1 per cent for the period April 1 to June 30, from 8.7 per cent, at present.

Similarly, the interest rate on KVP will be cut to 7.8 per cent from 8.7 per cent, according to Finance Ministry Order F.No.1/04/2016-NS.II, issued today.

While the interest rate on Post Office savings has been retained at 4 per cent, the same for term deposits of one to five years has been cut. The popular five-Year National Savings Certificates will earn an interest rate of 8.1 per cent from April 1 as against 8.5 per cent, at present.

A five-year Monthly Income Account will fetch 7.8 per cent as opposed to 8.4 per cent now. Girl-child saving scheme, Sukanya Samriddhi Account will see interest rate of 8.6 per cent as against 9.2 per cent.

Senior citizen savings scheme of five-year would earn 8.6 per cent interest compared with 9.3 per cent.

“On the basis of the decisions of the government, interest rates for small savings schemes are to be notified on quarterly basis,” the order said announcing the rates for the first quarter of fiscal 2016-17.

Post Office term deposits of one, two and three years command an interest rate of 8.4 per cent but from April 1, a 1-year Time Deposit will get 7.1 per cent, 2-year Time Deposit will earn 7.2 per cent and 3-Year Time Deposit will attract interest of 7.4 per cent.

Five-year time deposit will fetch 7.9 per cent interest in the first quarter as against 8.5 per cent while the same on five-year recurring deposit has been slashed to 7.4 per cent from 8.4 per cent.

The government had on February 16 announced moving small saving interest rates closer to market rates. On that day, rates on short-term post office deposits was cut by 0.25 per cent but long-term instruments such as MIS, PPF, senior citizen and girl child schemes were left untouched.

Post office savings of 1, 2 and 3 year term deposits, Kisan Vikas Patra (KVP) as well as 5-year Recurring Deposits till now earned 0.25 per cent higher interest than the government securities of similar tenures.

This advantage has been withdrawn with effect from April 1, 2016, the Finance Ministry said. On February 16, the government had left Sukanya Samriddhi Yojana, Senior Citizen Savings Scheme and the Monthly Income Scheme (MIS) — which command 0.75 per cent, 1 per cent and 0.25 per cent higher interest rate respectively than G-secs — untouched, saying they are linked to social security goals.

Similarly, long-term instruments such as 5-year term deposit and similar tenure National Saving Certificates as well as Public Provident Fund (PPF) had been left unchanged. But today, the interest rates on all these deposits have been cut.

Kisan Vikas Patra or KVP that currently provides for doubling of principal in 100 months (8 years and 4 months) will now be doubled in 110 months (9 years and 2 months) after the interest rate revision.

In February, the government had stated that the cut in small savings interest rate would help the economy move to “a lower overall interest rate regime eventually and thereby help all, particularly low-income and salaried classes”.

The government has also permitted premature closure of PPF accounts “in genuine cases”, like serious ailment or higher education of children.

“This shall be permitted with a penalty of 1 per cent reduction in interest payable on the whole deposit and only for the accounts having completed five years from the date of opening,” it added.

The interest rate for every quarter would be decided on the 15th of the preceding month.

So, for the April-June quarter, rates should have been set on March 15 but they were delayed. The rates for April-June quarter are based on G-Sec rates that prevailed in the previous three months — that is December, January and February.

PTI

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There seems to be some amount of lack of understanding about the changes made in the General Budget 2016-17 in the tax treatment for recognised Provident Fund & NPS.

The following clarifications are given in this matter:-

(i) The purpose of this reform of making the change in tax regime is to encourage more number of private sector employees to go for pension security after retirement instead of withdrawing the entire money from the Provident Fund Account.

(ii) Towards this objective, the Government has announced that Forty Percent(40%) of the total corpus withdrawn at the time of retirement will be tax exempt both under recognised Provident Fund and NPS.

(iii) It is expected that the employees of private companies will place the remaining 60% of the Corpus in Annuity, out of which they can get regular pension. When this 60% of the remaining Corpus is invested in Annuity, no tax is chargeable. So what it means is that the entire corpus will be tax free, if invested in annuity.

(iv) The Government in this Budget has also made another change which says that when the person investing in Annuity dies and when the original Corpus goes in the hands of his heirs, then again there will be no tax.

(v) The idea behind this mechanism is to encourage people to invest in pension products rather than withdraw and use the entire Corpus after retirement.

(vi) The main category of people for whom EPF scheme was created are the members of EPFO who are within the statutory wage limit of Rs.15,000 per month. Out of around 3.7 crores contributing members of EPFO as on today, around 3 crore subscribers are in this category. For this category of people, there is not going to be any change in the new dispensation.

(vii) However, in EPFO, there are about 60 lakh contributing members who have accepted EPF voluntarily and they are highly – paid employees of private sector companies. For this category of people, amount at present can be withdrawn without any tax liability. We are changing this. What we are saying is that such employee can withdraw without tax liability provided he contributes 60% in annuity product so that pension security can be created for him according to his earning level. However, if he chooses not to put any amount in Annuity product the tax would not be charged on 40%.

(viii) There is no change in the existing tax treatment of Public Provident Fund (PPF).

(ix) Currently there is no monetary ceilings on the employer contribution under EPF with only ceiling being that it would be 12% of the salary of the employee member. Similarly, there is no monetary ceiling on the employer contribution under NPS, except that it would be 10% of salary.

(x) Now the Finance Bill 2016 provides that there would be monetary ceiling of Rs1.5 lakh on employer contribution considered with the ceiling of the 12% rate of employer contribution, whichever is less.

(xi) We have received representations today from various sections suggesting that if the amount of 60% of corpus is not invested in the annuity products, the tax should be levied only on accumulated returns on the corpus and not on the contributed amount. We have also received representations asking for not having any monetary limit on the employer contribution under EPF, because such a limit is not there in NPS. The Finance Minister would be considering all these suggestions and taking a view on it in due course.

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The recently launched Sukanya Samriddhi Account (SSA) and Public Provident Fund (PPF) can be useful instruments for saving for the future needs of the children. The Sukanya Samriddhi Account can only be opened in the name of the girl child while PPF scheme can be availed by all. Experts say PPF scores over Sukanya Samriddhi Account in terms of liquidity (partial withdrawal facility) and other flexibilities. But Sukanya Samriddhi Account could potentially give higher returns, they add.

Eligibility: A Sukanya Samriddhi Account can be opened by the guardian in the name of a girl child till she attains the age of ten years. Only one account is allowed per girl child. Parents can open this account for a maximum of two children.

Limit: An investor can open PPF accounts in the name of minors but a maximum of Rs.
1.5 lakh can be deposited every year including all the accounts. In case of Sukanya Samriddhi Account, a maximum of Rs 1.5 lakh can be deposited per account.

Account Opening: A Sukanya Samriddhi Account can be opened with an amount of Rs.
1,000 while it is Rs 100 for a PPF account. Both these accounts can be opened at post offices and banks.

A charge of Rs 50 will be levied both in Sukanya Samriddhi Account and PPF if the minimum contribution is not made every year.

Minimum and maximum contribution: In an Sukanya Samriddhi Account, a minimum of Rs. 1,000 has to be deposited every year and the maximum limit is Rs. 1.5 lakh. And there is no limit on number of deposits either in a month or in a financial year.

In case of PPF, an individual but has to deposit a minimum of Rs. 500 in a financial year while the maximum limit is Rs.1,50,000. And deposits can be made in lump-sum or in 12 installments.

Maturity: The Sukanya Samriddhi Account can be closed after the girl child in whose name the account was opened completes the age of 21. If account is not closed after maturity, the balance will continue to earn interest as specified for the scheme from time to time. The maturity period of a PPF account is 15 years but it can be extended in blocks of five years.

Taxation: In terms for taxation, deduction up to Rs. 1.5 lakh is allowed under Section 80C in both the Sukanya Samriddhi Account and PPF. Also, both the schemes qualify for tax-free status on withdrawal and interest income.

Withdrawal: Partial withdrawal is permissible every year from the seventh financial year of opening the PPF account. In case of Sukanya Samriddhi Account, up to 50 per cent of the accumulated amount can be withdrawn after the account holder turns 18 while full withdrawal is possible after she turns 21.

Interest rate: The interest rate on Sukanya Samriddhi Account and PPF is not fixed. The government will every year declare the interest rate of the scheme. For 2014-15, the government would be paying 9.1 per cent interest on Sukanya Samriddhi Account against 8.7 per cent on PPF.

Loan: A loan facility is available from the third financial year of opening the PPF account. In Sukanya Samriddhi Account there is no such facility.

What Experts Say: Anil Rego, CEO of Right Horizons, a wealth management firm, said the choice between Sukanya Samriddhi Account and PPF is a trade-off between more flexibility and higher returns. PPF offers more flexibility while Sukanya Samriddhi Account can potentially give higher returns, he added. Investors with surpluses can look at the distributing their investments in both the schemes, Mr Rego added.

Suresh Sadagopan, the founder of Ladder 7 Financial Advisories, says both the Sukanya Samriddhi Account and PPF are similar schemes in nature in the debt space under Section 80C. The Sukanya Samriddhi Account is a good alternative if investors are comfortable at locking their money for a long time, he added.

Source : NDTV

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REGD. NO. D. L.-33004/99

The Gazette of India
EXTRAORDINARY
PART II—Section 3—Sub-section (i)
PUBLISHED BY AUTHORITY

No. 429] NEW DELHI, TUESDAY AUGUST 19, 2014/SRAVANA 28, 1936

MINISTRY OF LABOUR AND EMPLOYMENT
NOTIFICATION

New Delhi, the 19th August, 2014.

G.S.R. 593 (E).—In exercise of powers conferred by section 6A, read with Sub-section(1) of Section7 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), the Central Government hereby makes the following Scheme, further to amend the Employees’ Provident Funds Scheme, 1995, namely:-

1.
(1) This Scheme may be called the Employees’ Pension (Second Amendment) Scheme, 2014.
(2) It shall come into force on and from the 1st day of September, 2014.
2. In the Employees’ Pension Scheme, 1995(hereinafter referred to as the principal Scheme), in paragraph 12, after sub-paragraph (7), the following sub-paragraph shall be inserted, namely:-

“(7A) The monthly member’s pension including any relief payable to any existing or future member under this paragraph shall not be less than one thousand rupees for the financial year 2014-15.”.

3. In the principal Scheme in paragraph 15, for the words, brackets and figures “sub-paragraphs (2) to (5) of paragraph 12, as the case may be,”, the word and figures “paragraph 12” shall be substituted.

4. In the principal Scheme, in paragraph 16,-

(a) in sub-paragraph (2), in clause (a), after sub-clause (iv), the following sub-clause shall be inserted, namely:-

“(v) in all the cases, where the monthly widow pension including relief, if any, is less than one thousand rupees per month, the amount of monthly widow pension in such cases shall be enhanced to one thousand rupees per month for the financial year 2014-2015.”;

(b) in sub-paragraph (3), for clause (b), the following clause shall be substituted, namely:-

“(b) Monthly children pension for each child shall be equal to 25 per cent of the amount admissible to the widow of the deceased member as monthly widow pension payable under clause (a) of sub-paragraph (2):

Provided that the minimum monthly children pension including relief, if any, for each child of the deceased member shall not be less than two hundred and fifty rupees per month for the financial year 2014-2015.”;

(c) in sub-paragraph (4), for clause (a), the following clause shall be substituted, namely:-

“(a) if the deceased member is not survived by any widow, but is survived by children falling within the definition of family or if the widow pension is not payable, the children shall be entitled to a monthly orphan pension equal to 75 per cent of the amount of the monthly widow pension as payable under clause (a) of sub-paragraph (2):

Provided that the minimum monthly orphan pension including relief, if any, for each orphan shall not be less than seven hundred and fifty rupees per month for the financial year 2014-15.”.

[F. No. R-15025/3/2007.SS-II/Pt.II]

ARUN KUMAR SINHA,Addl. Secy.

Foot Note.- The Employees’ Pension Scheme, 1995 was published in the Gazette of India vide notification number G.S.R. 748(E), dated the 16th November, 1995 and was lastly amended vide notification number G.S.R. 80(E), dated the 14th February, 2013.

Source: http://www.labour.nic.in/upload/uploadfiles/files/latest_update/what_new/5400645038fa3MinimumPensionofRs.1000.pdf

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Government of India
Ministry of Finance
(Department of Economic Affairs)

New Delhi, the 4th March, 2014

RESOLUTION

It is announced for general information that during the year 2014-2015, accumulations at the credit of subscribers to the General Provident Fund and other similar funds shall carry interest at the rate of 8.7% (Eight point seven per cent) per annum. This rate will be in force during the financial year beginning on 1.4.2014. The funds concerned are:—

1. The General Provident Fund (Central Services).
2. The Contributory Provident Fund (India).
3. The All India Services Provident Fund.
4. The State Railway Provident Fund.
5. The General Provident Fund (Defence Services).
6. The Indian Ordnance Department Provident Fund.
7. The Indian Ordnance Factories Workmen’s Provident Fund.
8. The Indian Naval Dockyard Workmen’s Provident Fund.
9. The Defence Services Officers Provident Fund.
10. The Armed Forces Personnel Provident Fund.

2. Ordered that the Resolution be published in Gazette of India.

sd/-
(Peeyush Kumar)
Director (Budget)

Source: www.finmin.nic.in
[http://finmin.nic.in/the_ministry/dept_eco_affairs/budge/resolution14.pdf]

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