PPF account in minor's name

QUESTION: In continuation of your clarification on minor's right for
PPF account in post office or bank, I have opened on July 22, 2009,
(before the date of RBI clarification dated March 29, 2010) in St.
Thomas Mount post office one account in my name and two accounts in my
two minor daughters' names as provisions for their marriage. I have
contributed Rs.70,000 each and again I have deposited Rs.70,000 each
on July 3, 2010. Neither the agent for postal savings nor the post
office was aware of the rules. They accepted Rs.70,000 each in the
three accounts for the two years on the same date at the same time,
which continued for two years. In the third year, deposits were
rejected and I have been made to close the accounts of my two minor
daughters. Interest, whatever credited, had been withdrawn by the post
office, principal was only paid without any interest. I am at a great
loss. I wrote to the post office to treat the deposits as term
deposits and pay interest. I have not received any positive response.
Under these circumstances, do I have any remedy for interest?

ANSWER: There is no error in the reader opening accounts in her name
and two more accounts in the name of her two minor children. The
minors' accounts need not have been discontinued. However, the limit
of Rs.70,000 is an aggregate one, so that the bank had to return the
same. Since the reader had claimed relief for income-tax purposes only
on the amount of Rs.70,000, there has been no error in her income-tax
return. The reader's grievance is regarding loss of interest.
Ordinarily in such cases, banks do pay interest at the rate applicable
for savings bank account. But in the case of public provident fund
account, banks hold the deposit not as their own but on behalf of the
Central Government so that there may be some difficulty for the bank
in granting the same.

In a similar case, where the amounts were not withdrawn by the Hindu
Undivided Families after the term was over and could not be continued
in view of intervening restrictions, the Central Government allowed
interest vide F.No.7/4/2008-NS-II dated June 1, 2011 (2011) 335 ITR
(St.) 55 from the date of maturity till December 7, 2010, the date on
which an exception was made for running account till the date of
maturity. An exception can probably be made by the Department of
Economic Affairs (N.S.II), Union Ministry of Finance, on cases of
hardship in such cases where there has been contributory negligence,
where violation of the rules could not have escaped the attention of
the bank staff. The reader's plight illustrates the need for the
government to educate post offices and banks handling PF account and
not merely blame the investors by sticking to the doctrine “Buyer
beware” applicable to commercial transactions. The government should
not take advantage of taxpayer's ignorance.