PPF Account for Minors – Eligibility, Taxation and How to Open?
A Public Provident Fund or PPF account can easily be opened for minors with a deposit of just ₹100 while the yearly contribution must at least be ₹500. This article provides a detailed overview of how to open a PPF account for minors, eligibility, documents required and taxation. Read on!
What is a PPF Account for Minors?
A PPF account for minors is an account the parent opens for the child. In such cases, the adult handles the PPF account for minors and self. However, a PPF account of the minor will only be handled by the parent/guardian until the child turns 18. Furthermore, the guardian can only open a PPF account for a minor if they are natural or legal guardians only. The scheme is also only valid for Indian citizens.
The parent or guardian can contribute up to ₹1.5 lakh every financial year to their child’s PPF account. It is important to note that the amount deposited in the minor and self account are clubbed and have a combined limit of ₹1.5 lakh. In simpler terms, you split the limit of ₹1.5 lakh between your and your child’s account.
Features of PPF Account for Minors
- Only one parent (natural or legal guardian) is allowed to open and operate a PPF account for a minor.
- Every individual, including minors, can have only one PPF account
- No joint PPF accounts are allowed.
- Grandparents who become legal guardians after the parent’s death can also open a PPF account for a minor.
- PPF deposits can be made in lump sum or instalments.
- The maximum annual PPF deposit limit of ₹1.5 lakh includes the parent’s contributions to the minor’s account and his/her own account .
- The parent can nominate a person while opening a PPF account for a minor.
Objective of PPF Account for Minors
The idea behind opening a PPF for minors is to help them have a safety net for their secure future. By starting this process early, they always have something to fall back on during difficult situations. As this investment opportunity guarantees decent returns, it helps parents secure a stable financial future for their children while earmarking funds for their higher education or wedding. Additionally, it provides the parent with tax benefits.
Eligibility Criteria for Opening PPF Account for Minors
Some specific requirements and conditions must be met to open a PPF account for a minor. The eligibility criterion includes:
- The minor must be an Indian citizen or an Indian resident to open their account to avail of tax-free returns under the Public Provident Fund Scheme.
- The guardian or parent is responsible for opening the minor PPF account, and it is important to note that only one parent can open an account for the minor.
- The guardian must be the legal or natural guardian of the minor.
- The minor’s PPF account strictly cannot be operated by any other relative unless they have legal power over the minor post the original guardian/parent’s death.
- A suitable nominee must be nominated and registered while opening a PPF account. It could be the other guardian of the minor.
Documents Required to Open a Minor’s PPF Account
The parents/legal guardian of the minor child must provide these documents given below:
- Basic details of the guardian and minor, including name, age, gender, date of birth, etc., while filling out the account opening form.
- Account opening KYC documents and recent passport size photograph of the guardian.
- Age proof of the minor child can either be an Aadhaar Card or a Birth Certificate.
- A signed cheque for the initial contribution to the PPF account.
How to Open a PPF Account for Minors?
- Step 1
Visit your nearest post office or bank that offers PPF account services.
- Step 2
Fill out the PPF account opening form. Provide details such as name, DOB and parent/guardian’s name along with photo.
- Step 3
Attach the necessary documents, including the minor’s birth certificate or Aadhaar and the parent/guardian’s identity proof and address proof.
- Step 4
You will need to make an initial cheque deposit of ₹100 into the account to activate it.
- Step 5
The account will be opened in the name of the minor with the parent/guardian as the guardian of the account.
- Step 6
You can then start depositing money into the account.
- Step 7
Ensure that you make regular deposits into the account to keep it active.
*Note: The minimum annual contribution is ₹500 and the maximum contribution (including funds deposited in the parent’s PPF account) is ₹1.5 lakh in a financial year.
Also Read
Taxation on PPF Account for Minors
APPF account for a minor is a very beneficial investment that can help you save money on taxes while also giving you a boost on your child’s financial security. Note that the interest on the amount deposited in the PPF account is tax-free. Furthermore, the amount received upon maturity is also tax-free. Interestingly, under Section 80C of the Income Tax Act, all investments made in PPF accounts also offer a special additional tax deduction of up to Rs. 1.5 lakh every financial year. However, the deduction limit available on the parents and child’s PPFaccount is only Rs. 1.5 lakh.
Things to Consider before Opening a PPF Account for Minors
These considerations are vital to keep in mind before opening a PPF account for minors:
- Any resident Indian is eligible to open a PPF account in the name of their minor with a sum of Rs.100. It is important to note that the minimum annual contribution towards the minor’s PPF account must at least be Rs.500, and the maximum sum can be Rs.1.5 lakh annually.
- The amount invested by the parent or guardian is from their income; it is subjected to avail of all the tax benefits mentioned under Section 80C of the Income-tax Act. The guardian is subjected to avail of these tax benefits up to a sum of Rs.1.5 lakh every financial year.
- It is compulsory to apply to enable the transfer of account from the guardian to the minor quickly as the minor reaches the age of 18. When done, it is also necessary to submit necessary documents like age proof and signatures of the minor who is now a major. Furthermore, the application to transfer the account must be attested with the signature and name of the legal guardian.
- A parent or legal guardian might also seek to close the minor’s PPF account under a few specific conditions. The closure of the PPF account for the minors is only allowed after the completion five years from the day of the account opening, provided the sum is specifically being used for medical purposes of the account holder.
- The PPF for minors is a flexible account that can easily be closed prematurely if the amount invested or deposited is used for the higher education of the minor.
Final Word
A PPF account for minors is a brilliant way to avail of the tax benefits up to ₹1.5 lakh annually while also simultaneously providing your child with a financial security blanket. Furthermore, the PPF account holder can receive decent returns, typically higher than applicable FD rates, on their investments at very low levels of risk.
That said, if you’re looking for a tax-saver investment with higher returns potential, you may consider Navi ELSS Tax Saver Nifty 50 Index Fund – a passive ELSS that invests in India’s top 50 companies in a highly low-cost and transparent way.
Disclaimer: Mutual fund investments are subject to market risks, read all offer documents carefully
FAQs
Upon turning 18, the legal guardian or parent is responsible for applying with all the necessary documents and signatures as a request to transfer the power of the account to the minor.
Yes, the guardian can easily close the account of the minor prematurely. However, premature closing is allowed only when the sum deposited is being used for the child’s educational needs.
Money withdrawal from the minor account can be tricky. Although it is allowed, it can be done only after 7 years after depositing the money into the account. Furthermore, the guardian must show that the money withdrawn is being used only for the child’s needs.
The law does not allow you to deposit more than Rs. 1.5 lakhs a year. However, upon deposition of a greater sum, you shall not be eligible for tax benefits for the additional amount.
A family is allowed to have any number of PPF accounts. An individual account for each member is also allowed. However, an individual can have only one account either in a bank or in a post office and can deposit only Rs. 1.5 lakhs every year.
There is no age limit. One can even open a PPF account for a minor that can be handled by the minor only when she/he turns 18.
PPF could be considered a good investment for kids as it can offer risk-free returns typically higher than FD rates. The investments could be beneficial in funding for the child’s higher education among other expenses.
No. Neither PPF interest income nor its maturity value are taxable as the instrument enjoys highest tax efficiency in the country.
Parents can choose to start a PPF account for their child as soon as he/she is born, and extend it in blocks of 5 years after the completion of the 15-year maturity period.
PAN of the parent could be used for KYC verification process during the PPF account opening process for a minor. However, only Aadhaar or birth certificate is mandatory as an age and ID proof of the minor, plus other KYC documents of the parent.
Disclaimer
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
