Ten lesser-known facts about PPF accounts!

Published: June 17, 2020 at 9:53 am

Last Updated on October 30, 2023 at 2:52 pm

Here are ten lesser-known facts about PPF accounts concerning maturity, premature closure and nomination.

About the author: Shri R Vijayaraghavan is a Senior Banker retired from Indian Overseas Bank. Previously he worked in State Treasury and has vast experience in banking, investment wealth management and treasury. He is well-known for his helpful notes on the bank-promotion process; tips for retirees on savings and Investments and various articles on income tax, health insurance etc. Trivia: His son, Ramesh is an expert on Google sheets and has written a few useful screener sheets based on the old Value Research data.

PPF Nomination: PPF accounts opened before the advent of PPF rules 2019 contain Nomination in form E. There is a provision in Form E to nominate more than one person, with a proportionate share for each nominee. But such nomination creates a Trust not ownership on the Nominee. As per old Nomination form, the nominee/s is/are not entitled to ownership of the amount settled under deceased PPF account holder.

It is akin to Bank Deposits. A nominee does not get the right of ownership. He is only authorized to collect the money on the death of the subscriber and keep it with him as a trustee for the benefit of the persons who are entitled to it under the law of succession. Such payment to nominee does not deprive the legal heirs and holders of succession certificate to receive the amount in the hands of the nominee. [Supreme Court decision in VIDYA Vs VISHIN case, October 2000 and D.G.Posts letter No. 105-26/93-SB dated 5.8.1994] Reference: PPF Scheme Rule Book.

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To obviate this, PPF Scheme 2019 amended the Nomination form to include
Ownership benefits to the nominee. In the present Nomination form, there is an
option for PPF subscriber to specify nature of entitlement, whether Trustee or
Ownership with a due share for each nominee. ( Form 1) . { In fact in all Small Savings
Rules 2019, this provision of conferring ownership rights to the nominee have been

1: How many persons can be nominated in PPF accounts?
Maximum four can be Nominated at the time of opening of the account by
furnishing the following information in Form 1: (a) Name(s) of the nominee(s); (b)
Percentage share each nominee shall be entitled to; (c) Whether the nominee shall
receive the amount as a beneficiary with the absolute and exclusive right of ownership, or as a trustee for the benefit of the legal heirs of the depositor.

2. Whether the PPF Nomination can be Changed? For accounts opened
befoe 2019 with old nomination is it necessary to verify whether Nomination
is available and if not what needs to be done?
The nomination made may be varied by the depositors by making a fresh application using Form 10, ( Government Savings Promotion Rules, 2018) Application for cancellation or variation of nomination in an account under National Savings Scheme
) together with the Passbook, to the Accounts Office any time before the maturity of
the account. For accounts opened earlier, before core Banking, it is prudent to verify whether the nomination has been correctly mapped in the system. ( In my case I found it was not done and I made it recently) .

3: In case of death of a nominee how the account would be settled?
In the event of the death of the depositor of a single account or of all the depositors in a joint account, the eligible balance in the account shall be payable as specified to the
nominee/s in the proportion as specified by the depositor while making the
nomination, and if no such proportion or share is specified, then in equal proportion
to all the surviving nominees.

In cases where any other nominee has also died, the proof of death of such nominee to be given along with the claim, his specified share in the eligible balance shall be distributed among the surviving nominees in the same proportion as their specified shares.

The balance in the account of the deceased account holder shall earn interest until the
end of the month preceding the month in which the eligible balance is paid to the
nominee or the legal heir.

4. In case if there is no Nomination what is the cut off amount up to which hassle-free claim settlement can be made? Up to Rs 5 Lakh. Above Rs 5 lakh,a Succession Certificate is required.

5. What is the procedure for claim settlement without nomination? If a depositor dies and there is no nomination in force at the time of his death, and probate of his will or letters of administration of his estate or a succession certificate, as granted in the Indian Succession Act, 1925 (39 of 1925), is not produced within six months from the death of the depositor to the authorized officer of the Accounts Office where the account stands, then:

  • if the eligible amount in the account does not exceed Rs. 5 lakh, the authorized officer of the Accounts Office or the authority specified by the Institution to which the Accounts Office belongs, may pay the same to any person appearing to him as the rightful claimant and to his satisfaction to be entitled to receive the amount or to administer the estate of the deceased, on an application in
    Form-11 accompanied by the following documents; namely:-

    • (a) Death certificate
    • (b) Pass Book or deposit receipt/statement of account in original,
      (c) Affidavit in Form-13, (d) Letter of disclaimer in Form-14, (e) Bond of
      Indemnity in Form-15
  • if the eligible amount in a deceased account is above Rs. 5 lakh, the amount shall be paid by the Accounts office to the claimant on submission of ‘Succession Certificate’ issued by the court along with the following documents; namely:-
    • (a) Claim form,
    • (b) Pass Book or deposit receipt or statement of account in original,
    • (c) Death certificate of the account holder.

Maturity of PPF Accounts –Options available

6. If PPF account is already matured last year and the Subscriber failed to
extend the account? Whether he can do so now?

PPF accounts matured on 31.03.2019 or if the extended Five-year block matures on 31.03.2019, normally application for such extension has to be made within 1 year of maturity. This should have been done on or before 31.03.2020. Due to COVID 19 Situation, in tune with Govt relaxations now this can be done before 30.06.2020.

7. For The PPF account matured last year, the subscriber wants to close now, whether interest will be paid from the date of maturity. Or the outstanding as on date of maturity will be paid?

Many could be under the impression that after the Maturity of PPF account, further interest on that account ceases like Bank Deposits. In Bank deposits, interest on overdue deposits will be paid at the SB rate. But there is a difference in PPF accounts. In PPF accounts, the balance continues to earn applicable PPF interest till the date of closure. As per the Public Provident Fund scheme rules, the date of calculation of maturity is taken from the end of the financial year in which the deposit was made. It does not matter in which month or date the account was opened.

8. What are the options available on the Maturity of PPF Accounts?

On maturity, there are *three options* available.

  • *Option (1)* Any time after the expiry of fifteen years from the end of the year
    in which the account was opened, the account holder may apply in Form-3 to
    the accounts office for the closure of his account. The accounts office shall
    allow the withdrawal of the entire balance along with due interest up to the last
    day of the month preceding the month in which the account is closed.
  • *Option -(2)* The account holder may retain his account after maturity without
    making any further deposits for any period and the balance in the account will
    continue to earn interest at the rate applicable to the Scheme: Provided that the account holder may make one withdrawal, in each year, of any amount within the balance. Once the account is continued without deposits for more than a year, the
    the account holder shall not have the option again to continue the account with
  • *Option -(3)* Extension of account with deposits after maturity.-
    • The account holder on the expiry of fifteen years from the end of the year in
      which the account was opened, may extend his account and continue to make
      a deposit for a further block period of five years by applying to the accounts
      office in Form-4.
    • The option of extension shall be made by the account holder before the expiry of one year from the maturity of the account.
    • No deposits can be made in the account if the account holder fails to give
      his option to continue the account within one year from the date of maturity.
      Any deposit made in such account shall be treated as irregular and refunded
      by the accounts office immediately without any interest.
    • In case the person has opted to extend his account by a block of five years, during each block period he/she can make one withdrawal not exceeding 60% of the balance at the commencement of each block. This amount can be withdrawn either in one instalment (one year) or in more than one instalment in different years, not exceeding one withdrawal in a year. Yearly withdrawal ceiling is as applicable (50 % of the balance as at the end of the preceding year or preceding the fourth year whichever is lower.)

9. What are the circumstances under which PPF accounts can be pre-closed?

Premature closure of account.- An account holder shall be allowed premature
closure of his account on an application to the accounts office in Form-5, on any of
the following grounds, namely:

  • Treatment of life-threatening disease of the account holder, his spouse or
    dependent children or parents, on the production of supporting documents and medical reports confirming such disease from treating medical authority;
  • Higher education of the account holder, or dependent children on the production of documents and fee bills in confirmation of admission in a recognised institute of higher education in India or abroad;
  • On a change in residency status of the account holder on production of a copy of
    Passport and visa or Income tax return: Provided that an account under this Scheme shall not be closed before the expiry of five years from the end of the year in which the account was opened: Provided further that on such premature closure, interest in the account shall be allowed at a rate which shall be lower by one per cent than the rate at which interest has been credited in the account from time to time since the date of opening of the account, or the date of extension of the account, as the case may be.

10. Whether NRI can open PPF Accounts? Whether an NRI can continue to Remit into PPF account, which was opened when he was a resident?

  • NRIs are not eligible to open PPF accounts.
  • NRI can continue to remit in PPF account when the account was opened
    when he was a resident and subsequently the residential status was
    changed. The account can be continued until the maturity period of 15 years.

    • Remittance can be made from NRE/NRO accounts. On maturity, Repatriation benefits cannot be claimed in full and it is as applicable for NRO accounts.
    • The account can be continued until the maturity of 15 years. For a resident turned NRI, further extension( each block of 5 Years which is allowed to residents) will not be allowed.
    • The account can continue to earn till maturity the same interest as applicable to residents.
    • Note: As per Ministry of Finance Notification number GSR1237(E) dated
      3.10.17, PPF accounts of resident Indians who later became NRIs would be deemed closed from the date from which the account holder became an NRI. However, this rule has now been put in abeyance (as per Govt OM no. F/01/10/2016-NS dated 23.02.18) and NRIs can continue to hold PPF accounts as before.
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