Irregular PPF accounts: New rules from Oct 1, 2024 for regularisation of 3 types of irregular Public Provident Fund accounts

The Department of Economic Affairs, Ministry of Finance, recently issued guidelines for regularization of irregular Public Provident Fund accounts opened in deviation of small savings schemes' rules via post offices. Guidelines have been issued for regularization of PPF accounts opened in the name of minors, for multiple PPF accounts and relating to the extension of PPF accounts by NRIs.

The ministry issued a circular on August 21, 2024, laying down the guidelines for processing the cases of regularization of irregularly opened accounts under various National Small Savings Schemes through post offices. New rules for regularisation of irregular PPF, Sukanya Samriddhi Yojana, other small savings schemes with effect from October 1, 2024 have been explained in the circular.

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According to the circular dated August 21, 2024, "lt needs to be noted that the power to regularise irregular small savings accounts are vested with the Ministry of Finance. Therefore, all cases pertaining to irregular accounts should be forwarded to this division for regularisation by the Ministry of Finance."

Rules for regularization of irregular PPF accounts in 3 different cases are as follows:

Irregular PPF accounts opened under the name of a minor

Post Office Savings Account(POSA) interest will be paid for such irregular accounts until the individual who is minor becomes eligible for opening of account, that is, when the individual attains 18 years of age. Thereafter, the applicable interest rate will be paid.

Maturity period for such accounts will be calculated from the date the minor becomes an adult, that is, the date from which the individual becomes eligible to open the account.

Irregularity due to more than one PPF Account

The primary account will earn the scheme rate of interest as long as the deposit falls within the applicable annual ceiling. The primary account is one of the two accounts chosen by the investor in any Post Office or agency bank, and the investor prefers to keep the account after regularisation.

The balance in the second account will be merged with the first account, provided that the primary account remains under the applicable investment ceiling in each year. Following the merger, the primary account will continue to earn the current scheme rate of interest. Any excess balance in the second account will be repaid at a zero percent interest rate.

Note that except for the primary and second account, all other accounts will bear no interest starting from the day they are opened.

Irregularity relating to extension of PPF account by NRI

Only active NRI PPF accounts opened under the Public Provident Fund Scheme (PPF), 1968, where Form H did not specifically ask for the account holder's residency status, shall be granted a POSA rate of interest to the account holder (Indian citizen who became an NRI during the currency of the account) until September 30, 2024. Thereafter, the above mentioned account would receive zero percent interest.