Union Government makes amendments in Small Savings Act
The amended provisions will add to the flexibility in operation of the Account under Small Savings Schemes.
In order to remove ambiguities due to multiple Acts and Rules for Small Saving Schemes, Union Government on February 13, 2018 proposed merger of Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873.
For this, the relevant provisions of the Government Savings Certificates (NSC) Act, 1959 and the Public Provident Fund Act, 1968 will be subsumed in the new amended Act without compromising on any of the functional provision of the existing Government Savings Banks Act, 1873.
Objective behind the merger of these Acts
• The amendment is expected to strengthen the objective of “Minimum Government, Maximum Governance”.
• The main objective of 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.
• This amendment will also bring about certain flexibilities for the investors.
Consolidation of PPF Act
• While consolidating Public Provident Fund (PPF) Act, 1968 under the proposed Government Savings Promotion Act, government retained all existing protections.
• There is no proposal to withdraw the existing provisions and depositors will continue to enjoy protection under the amended umbrella Act as well.
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Apart from ensuring existing benefits, certain new benefits to the depositors have been proposed under the bill. These are:
Foreclosure of PPF Account: As per PPF Act, the PPF account can’t be closed prematurely before completion of five financial years. However, the amendment allows premature closure through which, depositors can withdraw the money from their PPF Account before 5 years. This provision is introduced keeping in mind the medical emergencies, higher education needs, etc.
Investment in Small Savings Schemes can be made by Guardian: On behalf of minors, guardians can now make investments in the Small Savings Schemes. Earlier, there was no clear provision regarding deposit by minors in the existing Acts. This provision will promote culture of savings among children.
Provisions for differently-abled people: In this new umbrella Act, government has introduced provision for the operation of accounts in the name of physically infirm and differently abled persons. There were no clear provisions in all the three Acts.
Right of Nominees: As per existing provisions of the Acts, if depositor dies and nomination exists, the outstanding balances will be paid to nominee(s). However, Supreme Court ruling denying the right of nominee to collect the amounts as Trustee for the benefit of legal heirs, was creating disputes. Hence, right of nominees have now been more clearly defined.
Provision for grievance redressal: The existing Acts are silent about grievance redressal. The amended Act allows the Government to put in place mechanism for redressal of grievances and for expeditious settlement of disputes relating to Small Savings.
No change in interest rate or tax policy: Apart from offering higher interest rates compared to bank deposits, some of the small savings schemes also enjoy income tax benefits. Despite the fact, government made no change in interest rate or tax policy on small savings scheme.