Public Provident Fund Act, 1968 repealed in Budget 2018In another significant move, the Public Provident Fund (PPF) that has been with us for nearly five decades has been fundamentally altered by Budget 2018. The scheme, which was created under its own separate act, Public Provident Fund Act, 1968, has been moved to a separate law that will now house all small savings schemes. With this move, the 50-year old Public Provident Fund Act has been repealed in one fell swoop. 

A key implication of this change is that the statutory protection against creditors given to the PPF account is now gone. In other words, your bank, income tax authorities or other creditors will be able to apply for the attachment of your PPF account to satisfy debts owed to them. This protection was given to depositors in the PPF account by Section 9 of the Public Provident Act, 1968, which will now stand abolished after the passage of The Finance Bill, 2018.

The law which will house all small savings schemes including PPF is called the Government Savings Banks Act, 1873. The schemes that will be housed under it are the Post Office Savings Accounts, National Savings Time Deposits, National Savings Recurring Deposits, National Savings Monthly Income Scheme, Sukanya Samriddhi Scheme, National Savings Certificates (VIII Issue) and Kisan Vikas Patra. (Read more about small savings schemes).

The government revises the interest rates on these schemes every quarter considering the prevailing interest rates on government bonds.You can find their current rates here

The old PPF provided for the manner of subscription, interest payable and withdrawal from the PPF. These will now be specified by the Central Government under the Government Savings Banks Act, 1873.

However, please note that the Employee Provident Fund corpus remains protected from attachment by Section 10 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952. That has not been touched.

First Update (March 15, 2018)

Amendments to the Finance Bill 2018 have restored the protection given to PPF account holders against creditors, including from attachment by the Income Tax Department. These were moved on 14th March 2018, approximately 6 weeks after the Budget was tabled in Parliament following feedback from the media and public. You can read about them here.
Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.