PPF, NSC Act changes not to affect tax status; aimed at allowing early closure: Govt
The government clarified that no change in interest rate or tax policy on small savings schemes, which includes PPF and NSCs, is being made through the amendments proposed in Budget 2018.
It has been proposed in the Budget to merge the Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873.
With a single Act, relevant provisions of the Government Savings Certificates (NSC) Act, 1959 and the Public Provident Fund Act, 1968 would stand subsumed in the new amended Act without compromising on any of the functional provision of the existing Act, says a press note issued today.
As per the note, these changes are proposed in order to allow the government to easily allow premature closure in the schemes and provide other procedural benefits to depositors by simply issuing a notification.
A ministry of finance tweet also stated, “All existing protections have been retained while consolidating PPF Act under the proposed Government Savings Promotion Act. No existing benefits to depositors are proposed to be taken away through this process.”
The government through the press note also makes it clear that there is no proposal to withdraw the provision of protection against the attachment of Public Provident Fund Account under any decree or order of any court in respect of any debt or liability incurred by the depositors and the existing and future depositors will continue to enjoy protection from the attachment under the amended umbrella Act as well.
Apart from ensuring existing benefits, certain new benefits to the depositors have been proposed under the bill. These provisions which are proposed to be incorporated in the amended Act will add to the flexibility in operation of the Account under Small Savings Schemes. These are:
i. Premature closure
Existing: As per PPF Act, the PPF account can’t be closed prematurely before completion of five financial years. If depositor wants to close PPF account before five years in exigencies, he can’t close the account.
Proposed: To make provisions for premature closure easier in respect of all schemes, provisions could now be made through specific scheme notification. The benefits of premature closure of Small Savings Schemes may now be introduced to deal with medical emergencies, higher education needs, etc.
ii. Investment by minors
Existing : Investment in Small Savings Schemes can be made by Guardian on behalf of minor(s) under the provisions made in the proposed bill Guardian may also be given associated rights and responsibilities.
Proposed : There was no clear provision earlier regarding deposit by minors in the existing Acts. The provision has been made now to promote culture of savings among children.
iii. Proceeds to heirs
Existing: As per existing provisions of the Acts, if depositor dies and nomination exists, the outstanding balances will be paid to nominee(s).
Proposed: Whereas, Supreme Court in its judgement stated that nominee(s) is merely empowered to collect the amounts as Trustee for the benefit of legal heirs. It was creating disputes between the provisions of the Acts and verdict of Supreme Court. Hence, right of nominees have now been more clearly defined.
Existing: In the existing Acts, there is no provision for nomination with regard to account opened in the name of minor. Further, existing Acts say that if account holder dies and there is no nomination and amount is more than prescribed limit, the amount shall be paid to legal heirs. In this case, the guardian has to obtain succession certificate.
Proposed: To remove this inconvenience, provisions for nomination with regard to account opened in the name of minors have been incorporated. Further the provision has been made that if the minor dies and there is no nomination, the balances shall be paid to guardian.
v. Grievance redressal
Existing: The existing Acts are silent about grievance redressal.
Proposed: The amended Act allows the Government to put in place mechanism for redressal of grievances and for amicable and expeditious settlement of disputes relating to Small Savings.
vi. Other changes
There were no clear provisions in all the three Acts for the operation of accounts in the name of physically infirm and differently abled persons. Provisions in this regard have now been made.