The five-year extensions of PPF for HUFs has been eliminated and all such accounts will be closed on March 31
All Hindu Undivided Families (HUFs) will have to close their Public Provident Fund (PPF) accounts by March 31, 2011 if they have completed 15 years. The extensions granted earlier will be void with effect from March 31, 2011 and all such accounts will be closed and the money refunded after deducting against loans, if any.
As per the gazette notification published on December 7, 2010, an account opened on behalf of a HUF prior to May 13, 2005 will be closed after expiry of 15 years from the end of the year in which the initial subscription was made and the entire amount standing at the credit of the subscriber will be refunded, after making adjustments in respect of any interest due from the subscriber on loans taken by him.
Accounts opened on behalf of HUF, where 15 years has already been completed, will also be closed at the end of the current year - March 31, 2011 and the entire amount standing at the credit of the subscriber shall be refunded after adjustments in respect of any dues from the subscriber.
This amendment in the Public Provident Fund (Amendment) Scheme 2010 is aimed at checking misuse as several people were investing in PPF to earn eight percent tax-free return as an individual as well as HUF, an attempt to earn double tax benefits, as an individual can hold only one account.
Hitherto, HUFs could open separate PPF accounts in accordance with the PPF rules. The head of the family is the karta or the main operator of the account, the others are family members. While daughters can be members of an HUF; on marriage, they cease to be members of the HUF PPF account promoted by their fathers.
The government stopped fresh investments by HUFs in PPF from May 2005. However, several of them continued to park funds in the popular savings scheme. Some were older investments that were yet to complete the 15-year period, while others availed of a five-year extension.
But a recent finance ministry notification has said that money should be refunded as soon as the 15-year period ends for PPF accounts opened by HUFs before May 13, 2005. For the accounts where the 15-year period has already ended, the money will be refunded on March 31 next year.
This means accounts opened after the ban was imposed in 2005 will be allowed to continue only till the tenure ends, while the others will be terminated at the end of the current financial year. The philosophy of small savings is to provide a savings window to the middle income segment or those living in remote areas where banking services are not available.
A resident Indian citizen of any age can open a PPF account. You can deposit a minimum amount of Rs 500 and a maximum of Rs 70,000 each financial year, in up to 12 instalments.
