Investing in PPF? Know government's new rule changes, interest rates
What's the story
The Indian government has made it easier for individuals to participate in various small savings programs, such as the Public Provident Fund (PPF) and Senior Citizen's Savings Scheme (SCSS).
Managed by the Department of Economic Affairs (DEA) within the finance ministry, these modifications aim to create a more flexible and inclusive environment for investors.
Read on to know what has changed.
What Next?
Changes in premature closure of PPF accounts
The new amendments bring about alterations concerning the early closure of PPF accounts.
These adjustments include provisions for using funds to address life-threatening illnesses affecting the account holder or their immediate family members, covering higher education costs, or dealing with changes in residency status.
To support these claims, individuals must provide relevant documentation such as medical records, proof of educational enrollment, and necessary immigration paperwork.
However, the rule that imposes a penalty for prematurely closing a PPF account remains unchanged.
Details
Extended timeframe for SCSS account opening
For the SCSS, the updated rules now allow individuals to open an account within three months instead of the previous one-month time frame.
As stated in the November 9 gazette notification, this change is designed to make the investment option more attractive and adaptable for senior citizens by providing them with additional time to receive and submit proof of their retirement benefits.
Facts
Modified interest rate for premature withdrawals from time deposit accounts
The interest rates for early withdrawals from five-year Time Deposit accounts have changed.
Earlier, if you closed a five-year account after four years from the date of account activation, the interest was calculated based on the rate for three-year Time Deposits.
Now, according to the new rules, the interest will be calculated based on the rate for Post Office Savings Accounts.
Insights
SCSS and PPF interest rates
The SCSS is tailored to offer a secure investment avenue for seniors, presenting a fixed interest rate of 8.2% per annum for up to a 5-year term, allowing investments of up to Rs. 30 lakh with tax-exempt interest income.
On the other hand, PPF serves the goal of accumulating long-term savings for retirement, featuring a 7.1% per annum interest rate over a 15-year term. You can invest a minimum of Rs. 500 annually.