New PPF rules effective October 1: What you need to know

The new rules aim to streamline the management of PPF accounts, particularly for minors, individuals with multiple accounts, and Non-Resident Indians (NRIs). Here's a closer look at the changes and what they mean for investors.

In Short

• New PPF rules effective October 1 impact minors and NRIs
• NRIs retain PPF accounts but face interest changes post-September
• Updated guidelines aim to streamline management of PPF accounts

The Ministry of Finance's Department of Economic Affairs has unveiled updated guidelines for Public Provident Fund (PPF) accounts, set to take effect on October 1, 2024.

The new rules aim to streamline the management of PPF accounts, particularly for minors, individuals with multiple accounts, and Non-Resident Indians (NRIs). Here’s a closer look at the changes and what they mean for investors.

Interest rate for minors’ PPF accounts

One of the most significant updates pertains to PPF accounts held in the name of minors. Under the new regulations, these accounts will earn interest at the rate applicable to Post Office Savings Accounts (POSA) until the minor turns 18.

Once they reach adulthood, the standard PPF interest rates will apply. This transition is crucial as it allows minors to benefit from a more favorable interest rate during their formative years.

Additionally, the maturity period for these accounts will be calculated from the date the minor attains adulthood, making it easier for them to manage their finances as they grow older.

Managing multiple PPF accounts

For individuals who hold multiple PPF accounts, the new rules clarify how interest will be calculated.

The primary account will continue to earn interest at the scheme rate as long as it remains within the yearly investment limit of Rs 1.5 lakh.

If the total balance across all accounts stays below this limit, any excess balance in a secondary account will be consolidated into the primary account.

However, if there is any remaining balance in the secondary account that exceeds this limit, it will be returned without earning any interest.

Importantly, any additional accounts beyond the primary and secondary will not accrue interest at all.

This change aims to discourage excessive account holdings while ensuring that investors can still benefit from their primary investments.

Extension of PPF accounts for NRIs

The new guidelines also address NRIs who hold existing PPF accounts.

These account holders can maintain their accounts until maturity; however, they will only receive POSA interest until September 30, 2024.

After this date, these accounts will not earn any interest if they do not meet specific residency criteria outlined in Form H. This adjustment primarily impacts Indian citizens who became NRIs while their PPF accounts were active.