Interest at PPF Rate Would BE Paid on Those PPF (HUF) Accounts, Which HAD Attained Maturity After 13-5-2005 BUT Closed by Subscribers Before 7-12-2010
Letter [F.No.7/4/2008-NS.II] was issued by the Central Board of Direct Taxes on 1 June 2011. Its subject is Interest at PPF Rate Would BE Paid on Those PPF (HUF) Accounts, Which HAD Attained Maturity After 13-5-2005 BUT Closed by Subscribers Before 7-12-2010.
This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.
Decides that interest at the Public Provident Fund rate will be paid on Public Provident Fund accounts of Hindu undivided families that matured after 13 May 2005 but were closed by the subscriber before 7 December 2010, provided the account was not extended after maturity and the deposits were retained without further subscription. It sets out the background: such accounts could be opened for Hindu undivided families only until 13 May 2005, after which the scheme was restricted to individuals; the Ministry's letter of 20 May 2005 allowed existing accounts to run to maturity with deposits and withdrawals as per the scheme, extension being subject to the 2005 amendment; and Notification G.S.R. 956(E) dated 7 December 2010 inserted a proviso requiring such accounts to be closed after fifteen years from the end of the year of initial subscription, with accounts that had already crossed fifteen years to be closed by 31 March 2011.
Subscribers who had closed such accounts between 13 May 2005 and 7 December 2010 and had not been paid interest at the scheme rate on deposits retained beyond maturity represented for that interest, and the Ministry examined and allowed the claim.
INTEREST AT PPF RATE WOULD BE PAID ON THOSE PPF (HUF) ACCOUNTS, WHICH HAD ATTAINED MATURITY AFTER 13-5-2005 BUT CLOSED BY SUBSCRIBERS BEFORE 7-12-2010
Payment of interest in respect of PPF (HUF) accounts
LETTER [F.NO.7/4/2008-NS.II], DATED 1-6-2011
I am directed to say that as per the provisions contained in Public Provident Fund (PPF) Scheme, 1968, prior to 13th May, 2005 accounts could be opened by individuals and on behalf of HUFs. With effect from 13th May, 2005 opening of PPF accounts has been restricted to "individuals" only. In this regard, a clarification was issued by Finance Ministry vide letter No. F.2/8/2005-NS.II dated 20-5-2005 intimating that PPF accounts of HUFs shall continue till maturity and deposits/withdrawals in/from these accounts shall be allowed to be made in accordance with the rules of the scheme. However, any extension of existing accounts shall be subject to the amendment dated 13th May, 2005.
2. As per Paragraph 9(3) of PPF Scheme, 1968 a subscriber to the account, any time after the expiry of 15 years from the end of the year in which the initial subscription was made, if he so desires, can apply for withdrawal of the entire balance standing to his credit. Further, as per proviso below Paragraph 9(3), the subscriber may, if he so desires, make withdrawal of the amount standing to his credit from time to time in instalments not exceeding one in a year.
3. An amendment has been made to PPF Scheme, 1968 vide this Ministry's Notification No. G.S.R. 956(E) dated 7th December, 2010. A new Proviso below Sub-Paragraph 3 of Paragraph 9 of PPF Scheme, 1968 has been inserted, according to which PPF accounts opened on behalf of HUFs prior to 13th May, 2005 shall be closed after expiry of 15 years from the end of the year in which initial subscription was made. In respect of those HUF accounts where the initial period of 15 years had already been completed prior to the issue of Notification dated 7-12-2010, such accounts were to be closed on 31st March, 2011.
4. Some of the subscribers of PPF (HUF) accounts had closed the accounts on maturity or thereafter between 13th May, 2005 to 7-12-2010 (before the issue of the aforesaid amendment). Some of such accountholders, were not paid interest at PPF rates on the deposits retained beyond the maturity period (without further subscriptions). Those subscribers had been representing that interest at PPF rate may also be paid to them on the deposits that were retained in PPF accounts beyond maturity period. The matter has been examined in this Ministry and it has been decided that interest at PPF rate would be paid on those PPF (HUF) accounts, which had attained the maturity after 13-5-2005 but closed by the subscribers before 7-12-2010, subject to the conditions that the accounts had not been extended thereafter and the deposits were retained in such accounts without further subscriptions.
5. The above decision may be circulated to all concerned for compliance.
6. This issues with the approval of Secretary (EA).
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You meet it in a claim to the post office or bank for interest on a Hindu undivided family Public Provident Fund account that was kept alive past maturity and then closed before December 2010.
Source: the Income Tax Department’s own published text — its page for this instrument.