Deposit scheme can be closed early for higher education, medical expense
In a significant move, the Finance Ministry has allowed subscribers
of the Public Provident Fund (PPF) to prematurely close their accounts
after a minimum of five years for reasons such as higher education or
expenditure towards medical treatment.
The Finance Ministry has also retained the interest rates on all small saving products for the second quarter of the fiscal.
On PPF, the Ministry, in a notification, said, the subscribers can
close the account if “the amount is required for serious ailments or
life threatening diseases of the accountholder, spouse, dependent
children or parents…or the amount is needed for higher education of the
account holder or the minor account holder.” It further added that
supporting documents and bills will have to be produced.
But such subscribers will get one per cent interest less than other
accounts. For instance, instead of an interest of the current 8.1 per
cent, a subscriber who chooses to prematurely close his PPF account
would earn interest of 7.1 per cent on the deposit. At present,
withdrawals from the PPF account are allowed after seven years of
opening the account. But it is only up to 50 per cent of the total
deposit till the end of the fourth year. The account matures after 15
years, when full withdrawal is permitted.
Interest rate
“On the basis of the decision of the government, interest rates for
small savings schemes are to be notified on quarterly basis,” said the
Ministry on Monday.
The return on PPF is maintained at 8.1 per cent in the July-September
quarter, the same as that in the quarter ending June 30, 2016.
Similarly, the interest rate on the Kisan Vikas Patra has been
maintained at 7.8 per cent for a maturity of 110 months, while the
return on the five-year National Savings Certificate is 8.1 per cent.
The government has moved to a quarterly reset of interest rates on small
savings beginning this fiscal. Under the new mechanism, returns on
these products are aligned with the market rates of the relevant
Government securities, in order to improve the monetary transmission of
interest rates by banks.
