New PPF rule: Interest calculation on premature closure of Public Provident Account account changed – check details
An account holder can request the premature closure of their own account, or that of a minor or person of unsound mind for whom they are the guardian, on specific grounds.These grounds include;
- the treatment of a life-threatening disease affecting the account holder, their spouse, dependent children, or parents. To validate the request, supporting documentation and medical reports from a treating medical authority verifying the disease are required.
- higher education for the account holder or their dependent children. In such cases, relevant documentation and fee bills confirming admission to a qualified institute of higher education in India or overseas must be presented.
- change in residency status of the account holder, which necessitates the submission of a copy of their passport and visa or income tax return.
It is important to note that an account formed under the PPF Scheme cannot be closed before five years have passed from the end of the year in which the account was opened.
Interest calculation on premature closure of PPF: New rule
Previously, premature closure would result in interest being allowed at a rate 1% lower than the rate at which interest had been credited in the account since its opening or extension.
However, under the new rule, in the Public Provident Fund Scheme, 2019, in paragraph 13, in the second proviso, for the words “or the date of extension of the account”, the words “or from the date of commencement of the current block period of five years” shall be substituted.
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This implies that the interest will be credited to the account at a rate 1% lower than the interest periodically credited since the start of the current five-year block period.
Interest on the PPF account is calculated at a rate of 7.1% per year and is paid on the lowest balance between the closing of the fifth day and the end of the month. At the conclusion of each year, interest is credited to the account, regardless of any changes in the account office due to transfers during the year.
Account holders who wish to close their account can apply to the accounts office after fifteen years from the end of the year in which the account was opened. The closure process can be initiated by submitting Form-3. The accounts office will process the withdrawal of the entire balance plus interest, up until the last day of the month preceding the account’s termination.
