PPF Account for Minors: Eligibility, documents required and Taxation
Public Provident Fund aka PPF is one of the most reliable Government saving schemes yielding safe and secure interest income to the investors over the years. PPF was started in the year 1968 as an investment option with return in the form of interest combined with tax benefits for the income tax payers.
What is the PPF Scheme?
Public Provident Fund (PPF) is an investment scheme of Government of India. Any individual can open a PPF account and invest their money to earn safe & secure interest income. PPF is also eligible under section 80C of the Income Tax Act to get a deduction to the extent of Rs. 1,50,000 from the gross income of the investor. PPF account can be opened not only for adults but also for minors.
However, the minor is not allowed to open PPF account himself rather open & maintain account through his/her guardian.
Eligibility for Minor PPF Account
The following are the eligibility criteria or conditions for opening a PPF account in the name of minor:
- Only Indian residents who are individual can open PPF account for their minor child.
- Only one PPF account can be opened in respect of one minor child. It means one of the either parents can open a PPF account in the name of a minor child.
- Individual who wants to operate PPF account on behalf of the minor should be a natural or legal guardian.
- Grandparents of the minor child cannot operate PPF account of the minor child. However, in case of the death of both the parents of the minor child, they could operate PPF account on behalf of the minor child.
- Registering a nominee is must while opening a PPF account.
- Minimum contribution to PPF account is Rs. 500 every year and maximum Rs. 1,50,000 every year.
How to open PPF account for minor child?
The Public Provident Fund (PPF) account for a minor can be opened with a post office or a designated bank branch authorized to open the PPF accounts. For the list of designated banks refer: List of banks offering PPF Accounts
Documents required for PPF account of minor
Following documents are required to be provided for opening PPF account:
- Age proof of the minor child (Aadhar card or Birth Certificate)
- Account opening KYC of the guardian (PAN & Aadhar) along with photograph
- Details of the guardian and minor in the account opening form
- Initial subscription cheque to PPF account
Income Tax on PPF savings:
The one of most important features of the PPF is that the interest income on PPF account is fully tax free. Even the amount received on maturity of PPF is also tax free. You can also take benefit of PPF contributions in the form of tax deduction under section 80C of the Income Tax Act, 1961. Maximum deduction allowed u/s 80C for PPF contribution is Rs. 1,50,000.
It means that if you contribute an amount upto Rs. 1,50,000 in your minor child’s PPF account, you are eligible to get tax deduction under section 80C.
Important points about PPF account of minor
- PPF account can be opened in the name of minor child with minimum initial contribution of Rs. 100 only. But keep in mind that minimum annual contribution is Rs. 500 to PPF account every year.
- Maximum contribution to PPF account is Rs. 1,50,000 every year
- Contribution made to PPF account of minor is eligible for tax benefits in the hands of parents making such contribution.
- On attaining majority, it is compulsory to transfer the account from the guardian to the minor. For this purpose, an application is to be submitted along with required documents and signed by both child and the guardian.
- Minor’s PPF account can be prematurely closed only after the completion of 5 years under certain specific conditions. Such specific conditions are for medical purpose of the accountholder or for the higher education of the minor child.
Frequently Asked Questions
FAQ-1: What is the minimum age for opening PPF Account of a minor?
There are no age restrictions for opening a PPF account. PPF account can be opened immediately after the birth of a child.
FAQ-2: How many PPF accounts can be opened by a family?
There is no restriction in having multiple PPF accounts by a family. But please note that one PPF account can only be opened for one member and the maximum total amount that an individual can deposit in a financial year is limited to Rs. 1,50,000.
FAQ-3: Is it possible to close the PPF account of a minor?
Yes, the parent or guardian of the minor can close PPF account of the minor under specific conditions like medical purposes or higher education needs of the accountholder. However, such premature account closure is allowed only after 5 years of account opening.
FAQ-4: Is it possible to transfer PPF account from one bank to another?
Yes, you can transfer your PPF account from one branch of bank to another or from one bank to another and from a post office to a bank and vice versa without any additional charge.
FAQ-5: Is it possible to make partial withdrawals from the PPF account of minor?
Yes, the guardian/ parents can make partial withdrawals from the PPF account of the minor. Such withdrawals are allowed only from the 7th year of opening the account. However, for the withdrawals, the guardian/ parents of the minor need to give a declaration that the withdrawals are made for the use of the minor only.
FAQ-6: What is the effect of depositing more than Rs. 1,50,000 in the PPF account of minor?
In case of deposit in excess of Rs. 1,50,000 in the PPF account, you will not be eligible for interest and tax benefits on such excess amount.
Disclaimer: The above article is meant for educational purposes only. Taxwink is not responsible for any loss or damage caused to any person from use of the above information. Readers are requested to act diligently before making any investment in any scheme.
