Changes proposed in the PPF Act by Budget 2018. Should you worry?


sqrrl blog ppf repelled should you be worried budget 2018

? Cool Title but what is the news?

The budget has finally rolled out. Among other things, there’s one important amendment you wouldn’t want to miss out! This modification could have a great effect on the way the PPF functions. Here, PPF refers to the Public Provident Funds. In the Finance Bill, a provision has been made to revoke The Public Provident Fund Act, 1968. However, this will only happen if this provision of the Bill is passed by the parliament.

? Okay, but what does it mean?

It means that once this Bill is passed, it will be nullified from the date when it is published in the official gazette. But you shouldn’t really be worried. The reason being, this does not mean that the PPF will be discontinued. Now, you must be wondering what this actually means? It means that all small savings schemes including PPF will now be covered under the Government Savings Banks Act, 1873.

Now, all these schemes will be under the control of the Government Savings Banks Act: Post Office Savings Account, National Savings Monthly Income (Account), National Savings Recurring Deposit, Sukanya Samridhhi Account, National Savings Time Deposit (1 year, 2 years, 3 years and 5 years, Senior Citizens’ Savings Scheme, Savings Certificates, Kisan Vikas Patra , National Savings Certificates (VIII Issue) and Public Provident Fund Scheme.

? Why should I care?

The bigger picture:

The Finance Bill has also provided clarifications. ongoing structure of the schemes will not change if the PPF Act is retracted. In the exact wordings of the bill,

All deposits made or accounts or certificates held under the repealed enactments shall be deemed to be deposits or holdings in the Savings Scheme made under the corresponding provisions of this (Government Savings Banks Act, 1873) Act.”

“The repeal shall not prejudicially affect the interest of depositors who, before the commencement of the Finance Act, 2018, made deposits or were issued certificates or made contribution to any scheme under the repealed enactments.”

However, one of the major advantages of the scheme may be at danger. PPF currently enjoys the freedom from court attachment (but not attachment under any order of income tax and estate duty authorities)

This provision may cease to exist when the PPF would be revoked.

For you personally:

The Ministry has also provided some relief. The deposits of investors in the PPF account prior to the commencement of the proposed amendment would enjoy the current protection against attachment as is available. This was confirmed by  Suresh Surana, Founder, RSM Astute Consulting Group. Also, he added that the deduction under section 80C shall continue for the deposits under the Government Savings Banks Act 1873. In the same manner, the interest earned by these deposits would also continue to enjoy the freedom from taxes. However, these are just assumptions. However, An explicit notification by the government in this respect would be required.

Also, about the features and the safety of the principal and interest earned on the PPF, they would not change.

So let’s see if the bill is actually passed by the Parliament and the proposed changes take effect in the PPF!

Written by

Vedant Kaushik