Further clarifications regarding Account of Hindu Undivided Family in Public Provident Fund issued by the Reserve Bank in Circular dated May 25, 2005 (2005) 35 TCR 290 (St.) reads as under:
"Public Provident Fund Scheme, 1968- Clarifications:
In this regard, Government of India, Ministry of Finance vide letter F.No.2/8/2005-NS-II, dated May 20, 2005 have, inter alia, issued the following clarifications:
(i) Sequel to amendments to various Small Savings Schemes to restrict the scope of investments only to individuals, the accounts, if any, opened by juristic persons (HUFs, Trusts and Provident Funds), that is, persons other than individuals (through single or joint accounts or deposits by guardians on behalf of minors and persons of unsound mind as per rules) on or after May 13, 2005, under any of the small savings scheme including Public Provident Fund Scheme, 1968, shall be treated as void ab initio and immediate action should be taken to close such accounts and to refund the deposits without any interest to the depositors.
(ii) It may, however, be noted that the above amendments shall not be applicable to the existing accounts opened in accordance with the rules in operation prior to the amendments dated May 13, 2005. These shall continue till maturity and deposits/ withdrawals in/from these accounts shall be allowed to be made in accordance with the said rules. However, any extension of existing accounts shall be subject to the amendments dated May 13, 2005.
The reader's inference that continuation of existing HUF Accounts is permissible stands confirmed.
The clarification that the Hindu Undivided Families (HUFs) can continue existing Provident Fund Accounts is welcome, so that deduction under Sec. 80C can be availed. But such benefit will not be available for National Savings Certificate-Series VIII, Mutual Funds and the like, since no purchase in the name of HUF is possible from May 14, 2005. However, as pointed out by the reader, contribution to Provident Fund, from HUF income in any account opened even after May 13, 2005 in the name of the persons specified under Sec. 80C(4), should be eligible for deduction under Sec. 80C, since Sec. 80C(4) permits contributions to Provident Fund and Unit Linked Insurance Plans in the name of spouse or child in the case of individual or any member of the family in case of HUF.
Merely because these savings schemes themselves have been discontinued in the name of HUF, the benefit of deduction for HUF is not lost as long as the savings are from the resources of the HUF.
Even in respect of savings certificate or any other contribution to mutual funds, there is no positive requirement that the deposit has to be in the name of the HUF as such, while in the case of provident fund and unit-linked insurance plans, there is a positive permissibility for having the account in the name of the family members.
The views of the reader should, therefore, pass muster, since they are well reasoned. If the object is to deny relief under Sec. 80C to HUF, such object is best achieved by amendment to Sec. 80C and not merely by shutting out unfairly the avenues of savings themselves hitherto available for the HUFs.