Premature Closure of PPF Accounts

eposit scheme can be closed early for higher education, medical expense

NEW DELHI, JUNE 20: 

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 account holder, 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.

Source : http://www.thehindubusinessline.com/

Finmin Order 2014 – Public Provident Fund (Amendment) Scheme, 2014

[TO 8E PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB
SECTION (i)]
Government of India

Ministry of Finance
(Department of Economic Affairs)

Notification

New Delhi, the 13th August, 2014

G.S.R. (E). – In exercise of the powers conferred by sub-section (4) of section 3 of the Public Provident Fund Act, 1968 (23 of 1968), the Central Government hereby makes the following further amendments to the Public Provident Fund Scheme, 1968, namely :-

1 (1) This Scheme may be called the Public Provident Fund (Amendment) Scheme 2014.

(2) It shall come into force from the date of its publication in the Official Gazette

2 In the Public Provident Fund Scheme, 1968, -

(i) in paragraph 3, in sub-paragraph (1), for the letters and figures ‘Rs.1,00,000′, the letters and figures ‘Rs.1,50,000 shall be substituted

(ii) In Form-A, in paragraph (iv), for the letters and figures ‘Rs.1,00,000’, the letters and figures “Rs.1,50,000 shall be substituted.

[F.No. 1/212014-NSII]

(DR.RAJAT BHARGAVA)
JOINT SECRETARY TO THE GOVERNMENT INDIA

Provident Fund Secrets

1) Your PF entitles you to pension too

Despite the popularity of the EPF as a saving tool, not many people are enthused by or even aware of the Employees’ Pension Scheme. Introduced in 1995, it is funded by diverting 8.3%, or a little more than a third of your PF contribution. The pension on retirement is linked to the number of years in service and the average salary drawn in the year before retirement.

However, the scheme has failed to draw the EPFO’s 5 crore members because of the measly payouts associated with it. The reason is that since most employers pay PF only on the mandatory salary cap of Rs 6,500 per month, the pension income for a majority of workers is abysmally low, at times, less than Rs 1,000 a month.

It is, however, possible to get a higher pension income. “Good employers like Infosys pay Provident Fund contributions on the entire basic salaries,” says SC Chatterjee, the Central PF Commissioner. “If your basic pay is Rs 30,000 a month, employers can invest 24% of this amount into your PF account. “You will be entitled to a pension on the basis of your actual basic pay rather than Rs 6,500,” he adds.

For salaries up to Rs 6,500, the government also chips in with a subsidy of Rs 75. This added up to Rs 994 crore for all EPF members in 2009-10. Another way smart employers help boost the pension is by raising the worker’s salary in the last year of employment.

“Suppose I earn Rs 25,000 and contribute 8.33% towards EPS. However, on my 57th birthday, my employer can raise my salary to Rs 1 lakh. Since my salary for the last one year will be Rs 1 lakh, I can get a pension of around Rs 50,000. So you can get twice your original salary as pension,” says Chatterjee.

However, for this to happen, the employer should have contributed his share to the Provident Fund on the actual basic salary, not the mandated limit of Rs 6,500 for the entire service period. Though this is not fair to other workers who are part of the pension pool, the pension scheme’s design makes this manipulation possible.

If you don’t want a pension from EPF, you can get the EPS money as a lump sum along with your PF balance. The benefit will not be linked to the actual contributions made, but to your last year’s average salary and the number of years in service.

What if: You retire early, die in harness, change jobs…

If you retire before the age of 58

Even if you stop working before reaching the age of superannuation, you can avail of pension benefits. However, you shouldn’t be less than 50 years of age. Also, the pension amount will be reduced by 2% for every year. So, if after working for 25 years, you take retirement at 50, your pension amount should be Rs 2,321 per month. But as you left service eight years before the age of superannuation, your pension will be reduced by 16%—it will be Rs 1,950.

Source : Economic Times

Provident Fund – Overview

Overview – General Provident Fund

1.Applicability — The GPF Rules are applicable to those Central Government employees who have been appointed on or before 31-12-2003.

2.Eligibility— Temporary Government servants after continuous service of one year, re-employed pensioners and permanent Government servants shall subscribe to GPF compulsorily. Temporary Government servants may subscribe to GPF even before completion of one year’s service.— Rule 4.

3. Amount of subscription.— A sum (in whole rupees) as fixed by the subscriber, subject to a minimum of 6 per cent of emoluments and not more than his total emoluments.— Rule 8(1).

4.”Emoluments” means pay, DP, leave salary and any remuneration of the nature of pay received in foreign service. Does not include DA.— Rule 2(1) (b).
NOTE.— Whole or part of the bonus amount (ad hoc or productivity linked) may be deposited in the Provident Fund.— Rule 7, GID (2).

5.Minimum subscription.— Should be fixed with reference to the emoluments on the 31st March of the preceding year and in the case of new subscribers to the emoluments on the date of joining the Fund.— Rule 8.

6.Enhancement / Reduction.— Subscription may be increased twice and/or reduced once at any time during the year.— Rule 8 (4).

7.Suspension of subscription.— Subscription to the fund shall be stopped during suspension, and at the option of the Government servant during leave on half pay, leave without pay and dies non. Proportionate subscription to be recovered for the period of duty and any leave other than HPL / EOL.— Rule 7 (1), and Rule 8.

8.Recovery to be stopped 3 months before retirement on superannuation.— No subscription should be recovered during the last three months ot his service.— Rule 7, GID (1).

9.Interest for 2007-08.— 8%.

10.Nomination.— A subscriber can nominate one or more person conferring the right to receive his GPF amount in the event of his death. I1″1″0/, than one person is nominated, the amount or share payable to each should indicated clearly. A subscriber may at any time cancel a nomination by notice and send a fresh nomination. A subscriber having a family can nominate 0uly members of his family. Subscriber having no family can nominate any person / persons, including a Company / Association / Body of individuals / a Charitable or other Trust or Fund. Subj ect to its validity, a nomination / notice 0f cancellation takes effect from the date of its receipt by the Accounts Officer.— Rule 5.
NOTE.— A nomination submitted to the Head of Office is valid even if the subscriber dies before it reaches the Accounts Officer.— C&A.G’s Decision (2), Rule 5.

11.Family.— “Family” includes wife / wives except judicially separated wife, husband (unless expressly excluded), parents, a paternal grandparent when no parent is alive, children (including adopted children), minor brothers, unmarried sisters and deceased son’s widow and children. A ward under the “Guardians and Wards Act, 1890″, who lives with the Government servant and to whom the Government servant has given through a special will the same status as that of a natural child, will also be treated as a member of the family.—-Rule 2.

Courtesy:-http://www.igecorner.com