Post office schemes: Post office schemes rules changed: Govt makes changes to PPF, Senior Citizen Savings Scheme (SCSS), 5-year time deposit

Post office schemes: Post office schemes rules changed: Govt makes changes to PPF, Senior Citizen Savings Scheme (SCSS), 5-year time deposit

The government issued a notification on November 7, 2023 making several important changes in the popular Senior Citizen’s Savings Scheme (SCSS), Public Provident Fund (PPF) and 5-year post office time deposit.

Here is a look at the changes made to these small savings schemes.

Changes Senior Citizen’s Savings Scheme (SCSS)

The government has made 7 changes to the Senior citizen Savings Scheme:
1. More time to invest retirement benefits
A retired individual of more than 55 years of age but below 60 years of age will now have three months’ from earlier one month time.
2. Investment by spouse of government employee
The new rules allow the spouse of a government employee to invest the financial assistance amount in the scheme.
3. Scope of retirement benefits defined
As per the notification, retirement benefit means any payment received by the individual due to retirement or superannuation. This includes provident fund dues, retirement or superannuation or death gratuity, commuted value of pension, leave encashment, savings element of group savings linked insurance scheme payable by the employer on retirement, retirement-cum-withdrawal benefit under Employees’ Pension Scheme (EPS) and ex gratia payments under a voluntary or special voluntary retirement scheme.
4. Deduction on premature withdrawal
As per the new rules, one percent of the deposit will be deducted if the account is closed before the expiry of one year of the investment.
5. No limit on the extension of SCSS
The account holder can continue to extend the account for n number of block – the block being of three years each. Further, the application has to be submitted for every extension. Earlier, the extension was allowed only once.
6. Interest on extension of scheme deposit
As per the new rule, in case the SCSS account gets extended on maturity, the deposit will earn an interest rate applicable to the scheme on the date of maturity or on the date of extended maturity.
7. Maximum deposit amount
As per the notification, “The deposit made at the time of opening of account shall be paid on or after the expiry of five years or after the expiry of each block period of three years where the account was extended under paragraph 8 from the date of opening of account. Provided that after the closure of the existing account or accounts, new accounts or accounts may be opened again as required by the depositor subject to the maximum deposit limit.”

7 changes in Senior Citizens Savings Scheme rules

PPF premature interest calculation changed

Earlier rule; “Provided further that on such premature closure, interest in the account shall be allowed at a rate which shall be lower by 1% 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”

What has changed: In the Public Provident Fund Scheme, 2019, in paragraph 13, in the second proviso, for the words “or the date of extension of the account”, the words “or from the date of commencement of the current block period of five years” shall be substituted, as per the Department of Post notification.

This means that the interest will be allowed in the account at a rate that will be 1% less than the interest that has been periodically credited to the account from the date of commencement of the current block period of five years.

New PPF rule: Interest calculation on premature closure of PPF account changed

Premature withdrawal penalty of post office FD

If a deposit in a five-year account is withdrawn prematurely after four years from the date of account opening, interest at the Post Office Savings Account rate of 4%.

Earlier, if a five-year time deposit account is closed after four years from the date of deposit, the rate applicable to three-year time deposit accounts will be used to calculate interest.

Penalty on premature withdrawal of post office FD hiked for this tenure

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Author: Shirley