Guidelines for multiple PPF accounts: Know the details

Public provident fund (PPF) is one of the safest and, therefore, one of the most-preferred investment options for the common people. But one is not permitted to have more than one PPF account. Recently, the department of economic affairs issued a notification and made amalgamation of multiple PPF accounts easy for subscribers. Besides, regularisation of irregular accounts has also been made easy by the ministry. If a person has more than one PPF account, one of them must be closed. The government has released a standard operating procedure for dealing with cases of amalgamation of PPF accounts.

The rule

According to the existing rule, if a person has more than one PPF account, the person will not get any extra benefit. And he/she must close the second account and retain the first one.

Besides, if any individual has a PPF account, he/she would not be able to open another one in his/her minor child’s name.

The amendment

Following the amendment if a person has more than one PPF account and deposits made in the accounts taken together add up to a sum within the prescribed deposit ceiling of Rs 1.5 lakh in a year, they would amalgamated and the account holder will be given an option to retain the account of his own choice.

Second, the PPF accounts in the same operating agency (bank or post office) could easily be amalgamated by adopting the procedure of transfer of the PPF account.

Third, if there is any PPF loan account, it should be closed before the amalgamation of accounts is carried out.

Fourth, if the annual contribution of the multiple PPF accounts cross the limit of Rs 1.5 lakh, the excess amount breaching the limit will be refunded to the subscriber without any interest.

Last but more important, a PPF account in the name of a minor child is treated separately and a parent is allowed to open a separate minor account in addition to the account in self name.

But the person will not get any tax benefit from the minor’s account.

Expert take

“PPF is one of the best investment options and everybody tries to utilise it fully. These new changes would be of great help and make the investor’s life easier,” said Saibal Biswas, a personal finance expert.

“The new rules of amalgamation of PPF accounts would help investors a lot. The changes pertaining to a minor’s account will allow people to save more,” said Subhasish Roy, deputy director general, MCC Chamber of Commerce and Industry.

Following these changes, if you open a PPF account in your minor child’s name without any tax benefit, it would still be a good option because you will still get 7.1% interest on your invested money, which is one of the highest guaranteed return among all debt instruments now, added Biswas.