Provident Fund For Your Kid: Is PPF A Good Option For Minor Children?

PPF, short for Public Provident Fund, constitutes a government-supported savings and investment plan in India. Renowned for its appealing interest rates, tax advantages, and minimal risk, it emerges as among the most favoured investment avenues within the nation.

Individuals can open a PPF account both in their name and on behalf of a minor or someone incapacitated. Parents have the option to open a PPF account for their minor child, which is often seen as a beneficial method to commence saving for their future. Offering attractive interest rates and tax advantages, the PPF account stands out as one of the investment options tailored for children.

Also Read: EPF Interest Rate: How To Calculate Interest On Your EPF Account

It’s crucial to understand that the PPF account will be managed by the parent or legal guardian until the minor child reaches 18 years of age. Subsequently, upon reaching adulthood, the minor has the option to independently operate the account.

PPF Account: Features

• Investment Limits A minimum of Rs 500 subject to a maximum of Rs 1,50,000 per annum may be deposited.
• The original duration is 15 years. Thereafter, on application by the subscriber, it can be extended for 1 or more blocks of 5 years each.
• The rate of interest is determined by the Central Govt. every quarter. At present it’s 7.10% per annum.
• Loans and withdrawals are permitted depending upon the age of the account and balances as on the specified dates.
• Investments in PPF accounts qualify for tax deduction under Section 80C of the Income Tax Act, up to a limit of Rs. 1.5 lakh per financial year. The interest earned on PPF accounts is also tax-free.
• Nomination facility is available in the name of one or more persons. The shares of nominees may also be defined by the subscriber.
• The account can be transferred to other branches/ other banks or Post Offices and vice versa upon request by the subscriber.

Key Things To Know About PPF For Minors;

• Eligibility: Any Indian citizen can open a PPF account for a minor child.
• Minimum Age: There’s no minimum age limit for the minor. Even infants can have a PPF account.
• Who Manages the Account: The parent or guardian manages the account until the minor turns 18.
• Minimum and Maximum Investment: The minimum initial deposit is Rs. 500, but the minimum contribution per year is Rs. 500. The maximum you can invest in a financial year (including your own PPF) is Rs. 1.5 lakh.
• Tax Benefits: Investments in a minor’s PPF qualify for tax deductions under Section 80C of the Income Tax Act.
• Maturity: The PPF account matures after 15 years. However, you can extend it in blocks of 5 years.

Things to remember;

The subscriber should not deposit more than Rs. 1.5 lakh per annum as the excess amount will neither earn any interest nor will be eligible for rebate under the Income Tax Act.

The amount can be deposited in a lump sum or instalments.

Interest is calculated on the minimum balance( in the PPF Account) between the 5th day and the end of the month and is paid on the 31st of March every year

An account holder shall be allowed premature closure of his account or the account of a minor or person of unsound mind who is the guardian on an application to the accounts office in Form-5, on any of the following grounds, namely;

• 1) Treatment of life-threatening disease of the account holder, his spouse or dependent children or parents, on the production of supporting documents and medical reports confirming such disease from treating medical authority
• 2) Higher education of the account holder, or dependent children on the production of documents and fee bills in confirmation of admission in a recognised institute of higher education in India or abroad
• 3) On change in residency status of the account holder on production of a copy of Passport and visa or Income tax return.

How To Open A PPF Account:

PPF accounts can be opened at any designated branch of any authorised bank or post office. To open a PPF account, you will need to fill out an account opening form and submit the required documents, such as your ID proof, and address proof.

Once you have opened a PPF account, you can make contributions to it at any time during the financial year. You can make contributions online, through NEFT/RTGS, or in cash at the bank or post office.