Is PPF A Good Option For Minor Child? What Parents Must Know About This Savings Option

PPF stands for Public Provident Fund. It is a government-backed savings-cum-investment scheme in India. It is one of the most popular investment options in the country, due to its attractive interest rates, tax benefits, and low risk.

Individuals in their own name as well as on behalf of a minor or a person of unsound mind can open the account. A PPF account can be opened by parents on behalf of their minor child. Opening a PPF account for a minor child is considered a good way to start saving for their future. With its interest rates and tax benefits, the PPF account is among the investment options for children.

It’s important to note that the PPF account will be operated by the parent or legal guardian until the minor child turns 18. After that, the minor can choose to operate the account independently.

PPF Account: Features

• Investment Limits A minimum of Rs 500 subject to a maximum of Rs 1,50,000 per annum may be deposited.
• 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. on a quarterly basis. 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.

Things to remember;

• The subscriber should not deposit more than Rs 1,50,000 per annum as the excess amount will neither earn any interest nor will be eligible for rebate under Income Tax Act. The amount can be deposited in lump sum or in instalments.
• Interest is calculated on the minimum balance( in PPF Account) between 5th day and end of the month and is paid on 31st 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 of whom 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 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 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 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, 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.