Type of PPF Account That Cannot Be Extended - Viral Bake

Type of PPF Account That Cannot Be Extended

PPF Account: There is a new circular hanging on the notice boards of post offices and other branches where PPF accounts are handled. The circular states, that from now onwards the Public Provident Fund (PPF) accounts of Hindu Undivided Families (HUFs) will not be extended anymore.

Until April 2005, apart from individuals, the commodities like HUFs were granted the privilege to open a PPF account and invest in it. However, the law was revised in May 2005, stating that only the individuals will be allowed to invest in PPF accounts and avail of its benefits.

Type of PPF Account That Cannot Be Extended

Experts On The PPF Scheme

IndusLaw, Partner, Sowmya Kumar says, “The intent behind introducing a PPF scheme was to create a provident fund for the general public, wherein subscribers can avail interest, tax benefits and also obtain loans or undertake withdrawals, subject to certain conditions. Initially, the PPF accounts could be opened by individuals and also by certain artificial persons such as HUFs. However, the law was later amended, and from May 13, 2005, onwards, HUFs and other entities were not allowed to open accounts. However, the existing HUF PPF accounts of that time could continue.”

As per updates, the PPF scheme of 1968 is now replaced by the Government with PPF Scheme, 2019. And according to the new guidelines also only the individuals are allowed to avail of PPF scheme benefits.

Before the introduction of the PPF scheme in 2019, the government provided an explanation in the years 2010 and 2011 regarding the HUF accounts that were initialized before May 2005. It says, “As per the amendments made to the PPF Scheme in December 2010, HUF PPF accounts opened before May 13, 2005, will be closed after 15 years from the end of the year in which the initial subscription was made. The entire amount standing to the credit of the HUF subscriber will be paid out along with interest earned on it. In case of HUF PPF accounts where the 15-year period has been completed, the accounts would be closed by March 31, 2011.”

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Clarification For HUF PPF Accounts

When a person opens a PPF account for investment purposes then the contributions towards that account are made for 15 years. However, an extension can be granted by the government with the block of funds for 5 years.

Mr Kumar says, “Another clarification was issued in 2011 which stated that HUF PPF accounts which attained maturity after May 13, 2005, and were closed before the 2010 amendment above, will also be paid PPF rate of interest on deposits retained beyond maturity period. This was subject to the conditions that the HUF PPF accounts had not been extended after December 2010 and that the deposits were retained in such accounts without further subscriptions.”

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