Amendments in Small Savings Act

Amendments in Small Savings Act

Ministry of Finance
Government of India makes Amendments in Small Savings Act;

Proposes merger of Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873;

All existing protections have been retained while consolidating PPF Act under the proposed Government Savings Promotion Act.​ ​

The Government gives highest priority to the interest of small savers, especially savings for the benefit of girl child, the senior citizens and the regular savers who form the backbone of our country’s savings architecture. In order to remove existing ambiguities due to multiple Acts and rules for Small Saving Schemes and further strengthen the objective of “Minimum Government, Maximum Governance”, Government of India has proposed merger of 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.

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 main objective in proposing a common Act is to make implementation easier for the depositors as they need not go through different rules and Acts for understanding the provision of various small saving schemes, and also to introduce certain flexibilities for the investors.

However, concerns have been raised from different corners and also by print and social media that the Government aims to bring down the 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. It is made clear that there is no proposal to withdraw the said provision 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 are:

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. 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.
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.

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.

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.
As per existing provisions of the Acts, if depositor dies and nomination exists, the outstanding balances will be paid to nominee(s). Whereas, Hon’ble 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.

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. 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.

The existing Acts are silent about grievance redressal. 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.

The above 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.

Apart from offering higher interest rates compared to bank deposits, some of the small savings schemes also enjoy income tax benefits. No change in interest rate or tax policy on small savings scheme is being made through this amendment.

Apprehension that certain Small Savings Schemes would be closed is also without basis.

Source: PIB News

Central Government decides to withdraw the notification on withdrawal from EPF

Central Government decides to withdraw the notification on withdrawal from EPF

Government Decides to withdraw the 10th February 2016 Notification with Immediate Effect

Press Information Bureau
Government of India
Ministry of Labour & Employment

21-April-2016 17:51 IST

Government Decides to withdraw the 10th February 2016 Notification with Immediate Effect

Government had issued a notification dated 10th February 2016 regarding rules for withdrawal from EPF Funds by the members. Under the revised rules, the employee was permitted to withdraw the employees’ share from the fund (which is 12% of the wages). However, it was prescribed that the employers’ share of contribution towards the Provident Fund (which is 3.67% of wage) would be allowed to be withdrawn only at the age of retirement (58 years). The objective was to provide a minimum social security to the workers at the time of retirement. It was noticed that over 80% of the claims settled by EPFO belonged to pre-mature withdrawal of funds, treating the EPF accounts as savings accounts, and not a Social Security instrument.

In order to address the issues the amendment stated above was carried out with the consent of Trade Unions and with the intention of promoting a decent accumulation of provident fund for the members at the end of their working lifetimes.

However, considering the representations received from various quarters and after consultations with the various stakeholders, Minister of State (IC) Labour and Employment, Sh Bandaru Dattatreya announced that the government has decided to withdraw the said 10th February 2016 Notification with immediate effect.

Accordingly, the workers are now allowed to withdraw the entire amount from the provident fund as per existing provisions of the EPF Scheme 1952 including the employers’ share of 3.67%.

Source: PIB News

Reduction of Interest Rates on Public Provident Fund

Reduction of Interest Rates on Public Provident Fund

Interest Rates on various Small Savings Schemes for the 1st Quarter of 2016-17 notified;. Additional Interest Rate spreads which the Government allows on Small Savings Schemes like PPF, Senior Citizen Savings Scheme, Sukanya Samridhi Scheme and NSC etc. are being continued and included in the rates notified today.

From the year 2012-13, the interest rates on various Small Savings Schemes (SSS) are recalculated and notified in the month of March every year. These rates are applicable for the next financial year. This is being done in line with the recommendations of the Shyamala Gopinath Committee to ensure that the interest rates of Small Savings Schemes are market linked.

Accordingly, as done in the previous years, the interest rates for various Small Savings Schemes were due for recalculation in March 2016. As notified on 16th February, 2016, instead of annual resetting of interest rates for the next financial year, the interest rates from now on will be reset every quarter based on the G-Sec yields of the previous three months. Consequently, the interest rates for various Small Savings Schemes were recalculated with reference to the G-Sec yields of equivalent maturity for the months December 2015 to February 2016. Based on this calculation, the interest rates on various Small Savings Schemes for the 1st quarter of 2016-17 have been notified today. The rates of interest on various small savings schemes for the First Quarter of Financial Year 2016-17, on the basis of the interest compounding/payment built-in in the schemes, shall be as under:

pf-interest-rate

This is a formula driven process.

Further, as notified earlier, the additional interest rate spreads which the Government allows on Small Savings Schemes like PPF, Senior Citizen Savings Scheme, Sukanya Samridhi Scheme, NSC etc. are being continued. The additional spread for these Schemes are 25 basis points for PPF, 100 basis points for Senior Citizen Savings Scheme, 75 basis points for Sukanya Samridhi Scheme, 25 basis points for five year time deposit, 25 basis points for National Savings Certificate and 25 basis points for Monthly Income Scheme. These additional interest rate spreads are being continued and are included in the rates notified today.

The quarterly revision of interest rates will ensure that the interest rates under Small Savings Schemes are more dynamically related to the current market rates, thereby enabling the Banks to move their interest rates in line with current money market rates.

Source: PIB News