Centre may allow Public Provident Fund account holders to opt out early

The central government may allow investors in Public Provident Fund schemes to opt out before the five year term is finished.

It has suggested several amendments to the laws governing small savings schemes such as PPF and National Savings Certificate, that have raised fears about investors losing out on benefits.

In case of medical emergencies or higher education needs, PPF accounts will now be allowed to close prematurely. Investment in small savings schemes can be made by a guardian on behalf of a minor under the provisions proposed in the Bill and the guardian may also be given associated rights and responsibilities.

There was no clear provision earlier, regarding deposit by minors in the existing laws and the new element has been included to promote savings among children.

There is also a specific provision to allow operation of small savings accounts by the disabled. A grievance redressal mechanism has also been put in place for quick settlement of disputes.

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, says the government.

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