How To Open A PPF Account For Minors?
PPF account for minors was crafted with the sole aim of mobilizing small amounts’ savings to provide an investment with fair returns along with the additional income tax benefits. PPF accounts for minor benefits the account holder as it gives considerably good returns while being an extremely reliable and safe investment.
A PPF account for minors can easily be opened with a deposit of just Rs.100 while the yearly contribution must at least be Rs.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 valid only for Indian citizens.
The parent or guardian can contribute up to Rs. 1.5 lakhs every financial year to their child’s provident fund. It is important to note that the amount deposited in the minor and self account are clubbed and have a combined limit of Rs. 1.5 lakhs. In simpler terms, you split the limit of Rs. 1.5 lakhs between your and your child’s account.
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 you give your child a boost in their counting rewards. It guarantees them a stable financial future. Additionally, it provides the parent with tax benefits.
Also Read: How to Open a PPF Account Online And Offline: Eligibility, Documents And How To Close A PPF Account
How to Open a PPF Account for Minors?
The adult’s KYC documents and their recent photograph are a mandatory requirement to complete the form filling process for opening a PPF account for minors and themselves. The parent/legal guardian must provide their basic details along with their child whose PPF minor account is to be opened. These details are crucial and must be filled out carefully on the account opening form. The legal guardian or parent must also produce age proof such as a birth certificate or Adhaar card for verification purposes.Also, the above-mentioned documents must be accompanied by the initial deposit cheque required for opening a PPF account for minors. The PPF account for minors can easily be opened in a nearby post office or bank. You can also use the PPF account for a minor online portal for online registrations.
Eligibility 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 or the other parent as well.
- The legal guardian can contribute a minimum of Rs. 500 every financial year and a maximum of Rs. 1.5 lakh to the PPF account of the minor during a particular financial year. It is vital to note that this amount is split between the self account and the minor’s account.
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.
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.
Also Read: What Is Public Provident Fund (PPF): Why You Should Have A PPF Account
Final Word
A PPF account for minors is a brilliant way to avail of the tax benefits up to Rs.1.5 lakhs annually while also simultaneously providing your child with a financial security blanket. The PPF account is flexible in terms of funding your child’s higher education or medical purposes, making it a good fit for early investment plans for your child. Furthermore, you receive decent returns for your investments.
FAQs on PPF Account for Minors
Ans: 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.
Ans: 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.
Ans: 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.
Ans: 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.
Ans: 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.
Ans: 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.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
