PPF And SSY Updates: Key Changes In Small Savings Schemes Starting October 1

The Indian government has announced important updates for small savings schemes like the Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY), effective from October 1, 2024. These changes are aimed at improving the management of these schemes and ensuring better compliance with the regulations. Let’s take a closer look at how these changes will impact investors and what you need to know if you have investments in these popular savings schemes.

1. Irregular National Savings Scheme (NSS) Accounts

The new rules classify National Savings Scheme (NSS) accounts into those opened before and after April 2, 1990:

Accounts opened before April 2, 1990:
- The first account will continue to earn interest at the current scheme rate.
- The second account will receive interest at the Post Office Savings Account (POSA) rate, plus an additional 2% of the balance.
- Starting from October 1, 2024, both accounts will no longer earn any interest (0%).
Accounts opened after April 2, 1990:
- The first account will earn the current scheme rate, while the second will receive the POSA rate.
- From October 1, 2024, both accounts will receive 0% interest.

Additionally, if an investor holds more than two accounts, no interest will be paid on any of the accounts. However, the principal amount will still be returned.

2. PPF Accounts Opened Under a Minor’s Name

For PPF accounts opened in the name of minors, the new guidelines clarify:

POSA interest will be paid on such accounts until the minor reaches 18 years of age.
After the individual becomes an adult, the account will begin earning interest at the applicable PPF interest rate.
The maturity period of the account will now be calculated from the date the minor becomes an adult, making this a crucial detail for parents or guardians opening accounts for their children.

3. Multiple PPF Accounts

Multiple PPF accounts often create confusion regarding interest calculations, but the new rules streamline this process:

If the total deposits across accounts stay within the annual deposit limit, the primary account will earn interest at the prevailing PPF scheme rate.
Any balances in secondary accounts will be combined with the primary account, ensuring compliance.
For any excess deposits beyond the prescribed limit, they will be refunded without earning any interest.
If there are more than two additional accounts, they will earn 0% interest from the date they were opened.

4. NRI PPF Accounts

The government has also addressed PPF accounts opened by Non-Resident Indians (NRIs) under the Public Provident Fund Scheme, 1968:

These accounts will earn POSA interest rates for Indian citizens who became NRIs during the tenure of the account until September 30, 2024.
From October 1, 2024, these accounts will start earning 0% interest.

5. Regularisation of Sukanya Samriddhi Yojana (SSY) Accounts

Changes have also been made to the management of SSY accounts, particularly when they are opened under the guardianship of individuals other than legal guardians:

If the account was opened by grandparents instead of the legal guardians, the guardianship will be transferred to the person entitled by law, such as the natural guardian (i.e., living parents) or legal guardian.
If more than two SSY accounts are opened in a family, violating the Sukanya Samriddhi Account Scheme, 2019, the irregular accounts will be closed and treated as being in violation of the guidelines.

What This Means for Investors

These new rules bring clarity to some of the long-standing issues in the management of small savings schemes. It’s crucial for investors to review their accounts and ensure they’re compliant with the new guidelines to avoid losing out on potential interest earnings. For those managing multiple PPF accounts or accounts opened under a minor’s name, it’s a good time to consolidate and regularize them in accordance with the new regulations.