All small savings scheme may come under one umbrella

The government Tuesday gave details of a Budget proposal to merge all small savings schemes such as PPF, Sukanya Samridhhi Yojana, National Savings Certificate, Kisan Vikas Patra and other time deposits under one umbrella.

It also sought to allay fears that the new law will take away any benefit of the old ones. Instead, it said the proposed law will allow pre-mature withdrawals in case of medical and educational needs.

The umbrella act will be known as Government Savings Promotion Act. At present, small savings schemes are covered under different acts and withdrawals from them comes at a high cost with a lot of difficulty.

The proposal, which is partly highlighted in the Finance Bill, 2018, will have to be passed by Parliament before it becomes a law. Parliament re-assembles in March to discuss on tax proposals.

The new proposal also amounts to repeal of the Public Provident Fund Act of 1968 but the government said all existing protections of the previous PPF Act would be retained.

"In order to remove existing ambiguities due to multiple Acts and rules for small saving schemes and further strengthen the objective of "minimum government, maximum governance", Government of India has proposed merger of Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873. With a single act, relevant provisions of the Government Savings Certificates (NSC) Act, 1959 and the Public Provident Fund Act, 1968 would stand subsumed in the new amended Act without compromising on any of the functional provision of the existing Act," the finance ministry said in a note.

"No existing benefits to depositors are proposed to be taken away through this process. The main objective in proposing a common Act is to make implementation easier for the depositors as they need not go through different rules and Acts for understanding the provision of various small saving schemes, and also to introduce certain flexibilities for the investors," it said.

The clarification came days after media raised concerns on the protection of PPF deposits under the proposed new law in case of attachment. Currently, PPF enjoyed the freedom from court attachment in case any debt or other liability incurred by the investor.

"Concerns have been raised from different corners and also by print and social media that the government aims to bring down the protection against the attachment of Public Provident Fund Account under any decree or order of any court in respect of any debt or liability incurred by the depositors. It is made clear that there is no proposal to withdraw the said provision and the existing and future depositors will continue to enjoy protection from the attachment under the amended umbrella Act as well," the ministry said.

As per the present PPF Act, the first withdrawal from the 15-year PPF account is allowed only in the seventh year. That too only half of the balance in the PPF account at the fourth year can be withdrawn. Premature closures of the PPF account can be done in case of emergencies but a heavy interest has to be paid. Closure norms for National Saving Certificates are tougher than PPF.

Once the Act is passed by Parliament, the government will make pre-mature closure provisions through notification for each scheme separately, according to a senior government official. The official said the changes are being made in line with the recommendations of the Law Commission, which had proposed amalgamation and a single act.