Until April 2005, apart from individuals, certain entities like HUFs were allowed to open and invest in PPF accounts. However, the law was amended in May 2005 wherein it was stated that only individuals can open accounts and avail PPF benefits.
Sowmya Kumar, Partner, IndusLaw says, “The intent behind introducing a PPF scheme was to create a provident fund for the general public, wherein subscribers can avail interest, tax benefits and also obtain loans or undertake withdrawals, subject to certain conditions. Initially, the PPF accounts could be opened by individuals and also by certain artificial persons such as HUFs. However, the law was later amended, and from May 13, 2005 onwards, HUFs and other entities were not allowed to open accounts. However, the existing HUF PPF accounts of that time could continue.”
It is important to note that the Government has now replaced the 1968 PPF scheme with the PPF Scheme, 2019. This new scheme again states that only individuals can open and invest in PPF accounts.
Prior to the introduction of the PPF Scheme 2019, the government issued clarifications in 2010 and 2011 regarding HUF PPF accounts that were opened before May 13, 2005. Kumar says, “As per the amendments made to the PPF Scheme in December 2010, HUF PPF accounts opened before May 13, 2005 will be closed after 15 years from the end of the year in which the initial subscription was made. The entire amount standing to the credit of the HUF subscriber will be paid out along with interest earned on it. In case of HUF PPF accounts where the 15-year period has been completed, the accounts would be closed by March 31, 2011.”
A PPF account comes with a maturity period of 15 years, which can be extended in blocks of five years. Now, suppose a HUF PPF account was opened in April 2005. As per the PPF scheme rules, this account will have to be closed 15 years after March 31, 2006, that is April 1, 2021. If you were to visit the post office to extend this PPF account, then you will not be allowed to extend it. The maturity amount will be credited to your bank account.
“Another clarification was issued in 2011 which stated that HUF PPF accounts which attained maturity after May 13, 2005, and were closed before 2010 amendment above, will also be paid PPF rate of interest on deposits retained beyond maturity period. This was subject to the conditions that the HUF PPF accounts had not been extended after December 2010 and that the deposits were retained in such accounts without further subscriptions”, adds Kumar.