Small savings scheme: New rules will be applicable from October 1

Business Business: PPF and SSY: Investors in small savings schemes should note that the new rules will come into effect from October 1, 2024, which is the beginning of the third quarter of the current financial year. Earlier this week, the Department of Economic Affairs under the Union Finance Ministry issued a circular with detailed information about the new rules to be adopted to regularise irregularly opened accounts under the National Small Savings (NSS) schemes through post offices. The Finance Ministry is the regulatory authority on small savings accounts. Any account found to be irregular should be directed to this division for necessary regularisation by the Finance Ministry in compliance with the established rule. The department has published six new rules that are relevant to investors in the National Savings Scheme, Public Provident Fund and Sukanya Samriddhi Account. The guidelines are classified into the following sections:

Irregular National Savings Scheme (NSS) accounts
Public Provident Fund (PPF) accounts opened in the name of minor
Holding of multiple PPF accounts
Extension of PPF account by Non-Resident Indian (NRI)
Regularization of Sukanya Samriddhi Account (SSA) opened by grandparents instead of parents.

1) Irregular NSS accounts
This is divided into three categories

Two NSS-87 accounts opened prior to DG order
Two NSS-87 accounts opened after DG order
In case of more than two NSS-87 accounts

Two NSS-87 accounts opened prior to the order of DG Post. No. 35-19/9GSB-III dated 02.04.1990:
(i). The scheme rate prevailing on the earliest account opened will be applicable.
(ii). The second account (opened after the first account) will attract prevailing POSA rate plus a discount of 200 bps on the outstanding amount.

(iii). Points (i) and (ii) will be subject to the following conditions:

(a). The total deposit in both the accounts should not exceed the deposit limit applicable for each year.

(b). The excess deposit (if any) will be refunded to the investor without any interest.

(iv). Points (i) to (iii) are in the nature of one-time special dispensation given to the investors of NSS-87 from the date of OM dated July 12, 2024 issued by Ministry of Finance till September 30, 2024.

(v). Both the accounts will attract interest at zero per cent rate from October 1, 2024.

Two NSS-87 accounts were opened following the order of DG Post. No. 35-19/90-SB-III dated 02.04.1990:

(i). The prevailing scheme will apply to the first account opened

(ii). The outstanding balance on the second account (opened after the first account) will be governed by the prevailing POSA rate, (iii). Points (i) and (ii) are subject to the following conditions:

(a). The total deposits in both the accounts should not exceed the applicable deposit limit for each year.

(b). The excess deposits (if any) will be refunded to the investor without any interest.

(iv). Points (i) to (iii) are in the nature of a one-time special dispensation for investors of NSS-87 from the date of OM dated July 12, 2024 issued by the Ministry of Finance till September 30, 2024.

(v). From October 1, 2024, both the accounts will earn interest at zero per cent rate.

In case of more than two NSS-87 accounts

The principles stated for two accounts opened before/after DG Post Order No. 35-19/90-SB-III dated 02.04.1990 shall apply. For third and more irregular accounts no interest shall be paid and the principal amount shall be refunded to the investor.

For PPF accounts

2. PPF accounts opened in the name of minor:

(a). POSA interest for such irregular accounts shall be paid till the person (minor) becomes eligible to open the account, i.e. the person attains the age of 18 years. Thereafter, applicable rate of interest shall be paid.

(b). The maturity period for such accounts shall be calculated from the date of attainment of majority by the minor, i.e. the date from which the person becomes eligible to open the account.

3. More than one PPF accounts:

(a). The primary account shall earn interest at the scheme rate provided the deposit amount is within the maximum limit applicable for each year. (Primary account is one of the two accounts chosen by the investor in any post office/agency bank where the investor wishes to continue the account after regularization).

(b) The balance in the second account will be merged into the first account provided the primary account remains within the projected investment limit each year. After merger the primary account will continue to earn interest at the prevailing scheme rate. Excess balance in the second account, if any, will be refunded with zero per cent interest rate.

(c) Any additional account beyond the primary and second account will earn interest at zero per cent interest rate from the date of opening of that account.