Public Provident Fund Scheme 2019

Vide notification dated 12^th December 2019, the Ministry of Finance has come up with Public Provident Fund Scheme 2019. As per the notification, the new Scheme shall be effective from the date of its publication in the Official Gazette. It is worthwhile to note that with the introduction of the Public Provident Fund Scheme 2019 all the earlier rules would be replaced with the new rules. The present articles briefly explain the newly introduced Public Provident Fund Scheme 2019.

Opening of an account under the Scheme

The individual is required to file an application in Form-1 for opening an account under the Scheme. A guardian is allowed to open a single account on behalf of minor or a person of unsound mind. It should be noted that joint accounts are not allowed under the Scheme. An individual can open an account under the Scheme within a minimum initial deposit of INR 500.

Limit and manner of deposit under the Scheme

The individual is required to deposit more than INR 500 under the Scheme in the given Financial year. However, the maximum amount of deposit by an individual cannot be more than INR 1,50,000 in a Financial Year. It is important to note that the total deposit under an individual’s own account and under the account of minor should not exceed the maximum limit of INR 1,50,000 in a Financial Year. An individual can make a deposit in lump-sum or instalments.

Receipt of Interest on the deposit

The individual is eligible to receive interest @ 7.9% per annum for a calendar month. Such interest shall be available on the lowest balance at the credit of an account between the close of 5^th day and at the end of the month. Please note, interest shall be credited to the account only at the end of each year.

Availability of loan against deposit

An individual can apply for the loan only after completion of two years from the date of the initial subscription but before the expiry of five years. The individual is required to apply for the loan by submitting an application in Form-2. The application is to be submitted to the accounting office. The individual can make an application for an amount less than or equal to 25% of the total amount credited in the account at the end of the second year immediately preceding the year in which the loan application is done. The individual is allowed only one loan in a year. The individual shall not be allowed fresh loan until the earlier loan is fully repaid with interest. In case the individual has opened an account, as guardian, on behalf of minor or person of an unsound mind, then, he can apply for a loan only for the benefit of the minor or person of an unsound mind. The individual in such case can apply for a loan by submitting a certificate in prescribed format to the accounts office.

Repayment of loan and interest amount

The individual is required to repay the principal amount within 36 months from the first day of the month following the month in which loan is taken. Such repayment can be done either in lump-sum or in instalments. After repayment of the principal amount, the individual is required to pay interest in maximum two monthly instalments at the rate of 1% per annum (in case the principal amount is repaid lump-sum) and at the rate of 6% per annum (in case the principal amount is repaid in instalments). The interest will be paid for the period starting from the first day of the month, following the month in which the loan was taken till the last day of the month in which loan was fully repaid.

Withdrawal of an amount from the account

The individual can apply for withdrawal of an amount from the account by filing an application in Form-2. The withdrawal is possible only after the expiry of 5 years from the end of the year in which the account was opened. The individual can make maximum withdrawal up to an amount not more than 50% of the credit balance at the end of the 4^th year immediately preceding the year of withdrawal or at the end of the preceding year, whichever is lower. In case the individual has opened an account, as guardian, on behalf of minor or person of an unsound mind, then, he can apply for withdrawal of an amount only for the benefit of the minor or person of an unsound mind. The individual in such case can apply for a loan by submitting a certificate in prescribed format to the accounts office.

Extension of an account with deposits (after maturity)

The account expiries after completion of 15 years from the end of the year in which the account was opened. However, if the account to be continued, the account holder is required to file an application in Form-4. Such an extension is available for a further block period of 5 years. The account holder is required to file an application for an extension before the expiry of 1 year from the maturity of the account. The facility of partial withdrawal is available to the extended account. However, such withdrawal is subject to the condition that the total withdrawal during the block of five years should not exceed 60% of the credit amount available at the commencement of the block period.

Discontinuation of an account

In case the individual fails to deposit the minimum amount of INR 500 in further years, post an initial deposit, such account shall be treated as discontinued account. Such discontinued account can be revived during its maturity period. The individual is required to pay a fee of INR 50. The individual is also required to deposit arrears of minimum amount of INR 500 for each year of default. The individual cannot apply for a new account before the closure of the discontinued account. Further, the individual cannot avail the facility of loan and partial withdrawal against such discontinued account.

Closure of an account

The individual can apply for closure of an account by filing an application in Form-3 to the accounting office. Such closure of account is possible only after the expiry of 15 from the end of the year in which the account was opened. However, the individual also has an option to continue the account, after maturity. In such a case, the individual cannot make any further deposits, however, the individual would continue to earn interest.

Premature closure of an account

The premature account closure is possible only after completion of 5 years from the end of the year in which the account was opened. By filing an application in Form-5, the individual or the individual acting as guardian of the account of minor or person of unsound mind can prematurely close an account on the following grounds:

Change in residential status (copy of passport or visa or income tax return needs to be submitted).
Treatment of life-threatening disease of individual or spouse or dependent children or parents (copy of supporting documents and medical reports needs to be submitted).
Higher education of individual or dependent children (copy of supporting documents and fee bills confirming admission in recognised institutes needs to be submitted).

Protection of credit balance amount from attachment

The credit balance of the account holder cannot be attached in respect of any debt/liability incurred by the account holder, as ordered under any order or decree of any court.