Started by the National Savings Organization with the idea of promoting small savings and investments among the people, the Public Provident Fund (PPF) was started in 1968 as an investment option offering decent returns and certain income tax benefits under the Section 80C of the Income Tax Act.
What is the PPF Scheme?
Any individual can open a PPF account and invest money in it. Considered one of the most ideal savings avenues for several investors, PPF investments also help in tax-saving. Additionally, not only adults but minors can also get their PPF account opened. However, the minor himself cannot open the account. In such cases, the account must be operated by the guardian until the minor turns 18.
Objectives
The scheme came into existence with the objective of mobilizing small savings by offering an investment with reasonable returns along with income tax benefits. Investments made in the PPF account are considered safe as they are guaranteed by the central government. However, these authorities can attach the concerned accounts for recovering their tax dues.
PPF Account Eligibility For Minors
The following conditions should be met in order to be eligible for opening a PPF account for a minor-
- Individuals who are Indian residents can open their account under the Public Provident Fund and avail tax-free returns
- Only one of the guardians can open the account
- Individual operating the account on behalf of the minor should be a natural or legal guardian
- PPF account cannot be operated by the grandparents of the minor child unless they are legal guardians after the death of the parents
- A nominee must be registered while opening the PPF account
- The individual can contribute a minimum of Rs. 500 and a maximum of Rs. 1.5 lakh to the PPF account of the minor, in a financial year (Please note that this should be the total contribution made by a family in a financial year)
How to Open PPF Account For Minors?
The Public Provident Fund account can be opened with a post office or a designated bank brand authorized to open the PPF accounts.
Documents Required
The parents/guardian of the minor child should provide the following documents-
- Details of the guardian and minor in the account opening form
- Account opening KYC documents of the guardian (along with the photograph)
- Age proof (Aadhaar card or Birth certificate) of the minor child
- Cheque for initial contribution to the PPF account of Rs. 500 and above
Taxation
The interest generated on the investment made in the PPF account and the maturity amount are both tax free. Moreover, under Section 80C of the Income Tax Act, the investments made in PPF accounts offer a tax deduction of up to Rs. 1.5 lakh, annually. However, it must be noted that only one PPF account (either of the guardian or the minor) can avail a deduction limit of Rs. 1.5 lakh.
Things to be Considered before Opening the PPF Account of a Minor
- An individual can open a PPF account in the name of his/her minor with a minimum initial amount of Rs.100. However, the maximum annual contribution should be Rs.500 and the maximum amount can be Rs.1.5lakh
- If the amount invested in the minor’s PPF account is from the income of the parent/guardian, then that amount can be included in the under Section 80C of the Income Tax and will be eligible for tax benefits
- It is mandatory to submit an application for the transfer of account from the guardian to the minor as soon as the minor reached 18 years of age
- In such cases, the application must be submitted along with the required documents and the signature of the depositor who has now become a major. This application shall also be attested by the guardian who opened the account
- A depositor can also seek to close the minor’s PPF account under certain specific conditions
- However, such closure is allowed only after the completion of five years, and on the grounds that the withdrawn amount will be used for medical purpose of the account holder
- Additionally, the minor’s PPF account can be closed prematurely if the amount is used for the purpose of the minor’s higher education
- If the guardian provides that the amount will be solely used for the welfare of the minor, the depositor can also apply for a loan on the PPF account
FAQs
Q1. What is the minimum age for opening a PPF account?
There is no restriction on the age limit to open a PPF account of a minor. However, a PPF account of a minor can only be handled by a parent/guardian on his/her behalf until the account holder turns 18.
Q2. How many PPF accounts can a family have?
A family can have as many PPF accounts; one for each member is also possible. However, the total amount that can be invested in PPF accounts by a family, as a whole is Rs 1.5 lakh.
Q3. What is the minimum and maximum amount required to open a PF account for a minor?
A PPF account of minor can be opened with as low as Rs. 100. However, the maximum amount that can be invested in the PPF accounts of a family is Rs. 1.5 lakh in a financial year, irrespective of the number of accounts.
Q4. What will happen if I deposit more than Rs. 1.5 lakh in a PPF account?
As per the law, you are not allowed to deposit more than Rs. 1.5 lakh in your PPF account in a financial year. Even if you do so, you won’t be eligible for any interest or tax benefits on the excess funds.
Q5. What to do when the minor turns 18?
When the minor turns 18 years of age, the parent/guardian of the minor account holder should submit an application regarding the change of status. The further operations should be handled by the account holder himself. He should then submit a revised application along with his signature and the documents required to be attested with the application form.
Q6. Is it possible to close the PPF account of a minor?
Yes, a parent/guardian can close the PPF account of the minor. However, premature closure of the minor’s PPF account can be done only if the amount is required for higher education of the account holder.
Q7. Is it possible to withdraw money from the PPF account of a minor?
A depositor can make partial withdrawals from the PPF account of a minor; however, only from the 7th year of opening the account. Additionally, the guardian has to make a declaration stating the money withdrawn is required for the use of the minor only.
Q8. Can I close the PPF account of my child?
A parent/guardian can close the PPF account of a minor only in specific cases such as the medical treatment of the account holder. Only after completion of 5 years of opening the account, he/she can raise a request for closing of the account.