Government to allow easy closure of small savings schemes
The Government Savings Certificates Act, 1959, and Public Provident Fund Act, 1968, will be subsumed with the Government Savings Banks Act, 1873.
You will soon be able to withdraw money from your Public Provident Fund (PPF) account before the mandatory five-year lock-in period. The flexibility to withdraw prematurely is likely to be extended to other small savings schemes like National Savings Certificate as well.
The finance ministry has proposed amendments to the existing Government Savings Banks Act to allow you to close the PPF account or withdraw savings before the end of the lock-in period. Currently, the Act doesn't allow closure of the small savings account such as PPF prematurely even in case of an emergency. These changes will come into force from April.
The Government Savings Certificates Act, 1959, and Public Provident Fund Act, 1968, will be subsumed with the Government Savings Banks Act, 1873, the finance ministry said on Tuesday. The new Act will be called the Government Savings Promotion Act which will retain all the relevant provisions of the old Acts.
The proposed amendments are part of the Finance Bill and will come into effect after its passage. As per the changes, the PPF account holders will be able to close their accounts prematurely before completion of five financial years. The government said it has made the amendments to help depositors deal with medical emergencies and needs for higher education.
Changes have also been made in the nominee clause to allow the actual legal heir to inherit the amounts in case of death of the account holder. The nominee (other than the heir) named in the nomination form will not get the money. The Law Commission had suggested the amalgamation of the three Acts to form an umbrella Act in order to bring it in conformity with a Supreme Court order in this regard.
The government will set up a grievance mechanism for settlement of disputes related to small savings.
According to the finance ministry officials, the main objective behind the amalgamation of the different Acts is to simplify the laws for the depositors as well as to introduce certain flexibility to the investors.
However, the experts wonder why it took the government so many years to bring the changes, considering that the PPF money belongs to the people and not the government. "These are obvious changes which have now been put into a legal framework," says investment expert and CEO of Value Research Dhirendra Kumar.
To promote the culture of savings among children, the small savings schemes could now be made by the guardian on behalf of a minor. Similarly, provisions have also been made for operating the account on behalf of the differently abled persons. There were no clear provisions in this regard in the current law.
Meanwhile, the PPF depositors will continue to enjoy protection from the attachment under the amended Act, the government has clarified. Also, there is no change in interest rate or tax policy on small savings schemes.
Source: DNA Money