banking and finance

Finance Ministry says a new savings law on the anvil will allow premature closing of PPF accounts

The ministry said the legislation will not hamper the tax benefits on such deposits.

The Finance Ministry said on Tuesday that the government had proposed to allow Public Provident Fund accounts to be closed prematurely.

Under the present Public Provident Fund Act, the depositor cannot close his account for five financial years from the time it is opened. However, the government could make provisions through notifications to allow such account to be closed in cases of medical emergencies or higher educational needs.

The Centre plans to merge the Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873, and create the new Government Savings Promotion Act, the ministry said. It added that this would benefit the small savers, seniors citizens and savings made for the benefit of the girl child.

The ministry said it has also proposed that opening small savings accounts in the name of minors be allowed. The notification said that under the proposed legislation, investments in small savings schemes can be made by guardians on behalf of minors.

It added that under the present three Acts related to savings, there was no clear provision for deposits by minors, or operation of accounts in the name of physically infirm individuals. It said the proposed Act would include such provisions. The new Act also introduces a mechanism for redressal of customer grievances.

The Finance Ministry asserted that contrary to reports in the media, the new legislation will not take away the benefits conferred upon depositors under the present Acts. It said that no small savings schemes operating at present would be closed, and the proposed law would also not take away tax benefits on such deposits.

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