PPF for Kids: How to Open a PPF Account For Minors?

If you're planning to open a PPF account for minors on their behalf then this article is for you. Read on to know why it can be beneficial for the minor.

PPF is one of the most popular investment options in India. It is mainly because of the minimum deposit requirements and the tax exemptions that a person gets. One of the biggest benefits of investing in a PPF account is that the interest earned is tax-free. This means that the returns are higher than other investment options. In this article, you will read about the features of a PPF account for minors and important points to keep in mind if you are opening a PPF account for a child on their behalf.

Under PPF scheme, there wont be any restrictions on both parents contributing to child’s PPF account. As per this scheme any person can contribute more than 1.5 lakhs to their account and their child’s minor account taken together in a same year.

Did You Know – If you plan to make the deposit in the PPF account in installments you must know that the number of installments cannot exceed more than 12.

What is PPF?

Public Provident Fund (PPF) is a savings-cum-tax-saving instrument in India, introduced by the National Savings Institute of the Ministry of Finance in 1968. It is a long-term investment option with a maturity period of 15 years. It is backed by the Government of India and offers a safe and secure way to accumulate savings for future needs.

PPF Account for Minors – PPF is open to all Indian residents and Hindu Undivided Families (HUFs). The minimum amount that can be invested in a year is ₹500 and the maximum is ₹1.5 lakh. The interest rate on PPF is set by the government and is reset each year. It offers attractive tax benefits under Section 80C of the Income Tax Act 1961. The interest earned and the maturity amount are both tax-free.

PPF is a good option for those who want a safe and secure investment with a reasonable return. It is a long-term investment, so it is suitable for those with long-term financial goals. It is also a good option for those looking for tax savings.

Objectives on PPF account for Minors

A Public Provident Fund (PPF) account is a popular long-term savings option in India that allows investors to accumulate wealth while earning a tax-free return on their investment. PPF accounts are not just limited to adults; minors can also benefit from them. Here are some objectives of a PPF account for minors:

1. To encourage savings habits among minors
2. To build a long-term corpus for the future expenses of the child
3. To provide tax-free returns on the investment
4. To avail of the tax benefits under Section 80C of the Income Tax Act, 1961

Eligibility criteria on PPF Account for Minors 

To be eligible for a PPF account, minors must meet the following criteria:

1. The account can only be opened in the name of a minor by their parent or guardian.
2. The minor must be a resident of India.
3. The minor’s age should be below 18 years.

The following Eligibility criteria should be met to open a PPF account for a minor-

• Residents of India can open a Public Provident Fund account and receive returns that are tax-free.
• Just one of the guardians may open the account.
• A natural or legal guardian must be the person managing the PPF Account for Minors.
• Grandparents of a minor child cannot manage a PPF account unless they are appointed legal guardians after the parents’ passing.
• In order to open a PPF account, a nominee must be registered.
• A person can make a minimum contribution of Rs. 500 and a maximum contribution of Rs. 1.5 lakh to the minor’s PPF account during a financial year (Note that the maximum cumulative contribution a person can make during a financial year is Rs. 1.50 lakh in both his and the minor’s account).

Documents Required to Open PPF Account for Minors

Documents Required for PPF fund for Minors are:

• Documents that can be used as age proof for the minor. For example, Aadhar card.
• The legal guardian of the minor must present that KYC document and it must include that identity proof passport size and address proof. Aadhar card, PAN card, driver’s license, or other such documents can be used as identity proof.
• A PPF form with all the information about the minor and the Guardian must be submitted.
• An initial contribution has to be deposited into the PPF account and a check is required for that.

How to Open a PPF Account For Minors?

The process of opening a PPF account for a minor is similar to that of opening a regular PPF account. Here are the steps to follow:

1. The parent or guardian must visit a bank or post office that offers PPF accounts.
2. The parent or guardian must fill out the PPF account opening form with the necessary details of the minor.
3. The parent or guardian must provide KYC documents for themselves and the minor.
4. The parent or guardian must make an initial deposit of Rs—100 in the PPF account.
5. The parent or guardian must submit the necessary documents, such as the minor’s birth certificate, as proof of age.

Taxation

The interest earned on a PPF account for minors is tax-free. However, contributions made to the account are eligible for tax benefits under Section 80C of the Income Tax Act, 1961, up to a maximum of Rs. 1.5 lakh per financial year.

Features of PPF Account for Minors:

1. The minimum investment in a PPF account for minors is Rs. 500 per year, and the maximum investment is Rs. 1.5 lakh per year.
2. The account has a lock-in period of 15 years, and the maturity amount is tax-free.
3. The account can be extended for a period of five years after the maturity period.
4. The account can be opened in any authorised bank or post office.
5. A nomination facility is available for the PPF account for minors.

Other Benefits of a PPF account

Apart from tax benefits, a PPF account for minors offers the following benefits:

1. It is a safe investment option as the government backs it.
2. The interest rate is higher than that of a savings account.
3. The account can be used as collateral for loans.
4. The account can be transferred from one authorised bank or post office to another.

Rules: Important Points to Remember 

If you’re planning to open a PPF account for minors and you are the legal Guardian, parent, or natural guardian of that child, it is important that you know some important things about public provident funds.

 We have mentioned some points that will help you in the future.

• ₹100 is the minimum initial deposit that a person has to make to open a PPF account for minors.
• Once you open the account you have to submit at least ₹500 in the PPF account to maintain it.
• The maximum amount that a person can deposit is ₹150000.
• If the amount that is deposited into the PPF account for minors is deducted from the guardian’s income, that amount is exempted from tax under section 80C of the Income Tax Act of India.
• When the minor turns 18 years old it is compulsory to transfer the account from Guardian to the minor.
• An application has to be submitted where the account was opened with the required documents.
• Parents are allowed to withdraw funds from PPF accounts after 7 years. But they have to provide documents that prove that the withdrawn amount will be used for the minors’ benefit.
• In certain situations, the guardian can close the minor’s PPF account. This can be done if the child requires medical treatment or for education purposes. This is to be noted that the PPF of an account can only be closed after at least five years of opening it.
• The Guardian can take the loan against the amount in the public provident fund of the minor. But this amount must be used only for minors’ benefit and the guardian has to provide documents proving that.

FAQ On PPF Account for Minors

What is the limit for PPF for minors?

The minimum investment in a PPF account for minors is ₹500 per year, and the maximum investment is ₹1.5 lakh per year.

Can parents open a PPF account for minors?

Parents or guardians can open a PPF account for minors.

Is Sukanya samriddhi better than PPF?

Sukanya Samriddhi Yojana (SSY) is a scheme specifically designed for the girl child. It offers a higher interest rate than PPF and has a shorter lock-in period of 21 years. However, the investment in SSY is limited to ₹1.5 lakh per year

Conclusion

PPF accounts are one of the safest investments available in India as they are backed by the government. This makes them a great option for children since their capital is at minimal risk.

Opening a PPF account for minors is very beneficial for them as it can be used for multiple purposes in the future such as their higher education marriage or other backup funds. There is no age restriction for opening a public provident fund account so no matter what the age of the minor is it can be done anytime. This is a great tool to secure the child’s future financially.

Helpful Links

• How to Calculate Wealth Using PPF Calculator
• What Is the Formula to Calculate PPF
• How Is Interest Calculated On PPF