PPF lock-in of 15 years too much? Soon you may close account within 5 years

The Finance Bill 2018 has a lot more than what met our eyes at first. With regard to small savings schemes, an important amendement has been introduced that will change the way all savings schemes including Public Provident Fund (PPF) function. 

The amendment stipulates that all small savings schemes such as PPF, Sukanya Samridhhi Account, National Savings Time Deposit, Senior Citizens' Savings Scheme, Savings Certificates, Kisan Vikas Patra etc will now fall under the ambit of Government Savings Promotion Act. Currently, all schemes are covered under different acts. 

The amendment with regard to PPF is most striking. If indeed this provision of the Bill is passed by Parliament, The Public Provident Fund Act, 1968, will stand repealed. 

However, this doesn't mean your PPF accounts will stand annulled. Structurally, nothing changes for the PPF accounts. 

Life will become a tad easier for PPF account holders as under the proposed amendments, the government may notify norms for premature closure of small saving schemes in the event of medical or financial emergencies. 

For now, PPF deposits come with a lock-in period of fifteen years. Heavy penal interest is charged on premature withdrawal. One may withdraw 50 per cent of the PPF desposits after seven years. If the new Act becomes law, the govt may reduce the lock-in duration for PPF accounts.  

However, there are concerns about the protection of PPF desposits in case of attachment. Currently, PPF enjoys the freedom from court attachment i.e. the PPF balance is not subject to attachment under any order or decree of a court in respect of any debt or other liability incurred by the investor. 

Economic Affairs Secretary SC Garg clarified in a tweet that this benefit will stay. 

"Public Provident Fund (PPF) Deposits enjoy protection from being attached. All existing protections have been saved while consolidating PPF Act under proposed Government Savings Promotion Act. Existing and new PPF deposits would continue to have this protection," he tweeted.