The Buyt Desk
Public Provident Fund (PPF) is a Government-backed savings scheme. You can use it to create a retirement corpus. Contrary to a low savings account interest rate, the interest rate of a PPF account is high. The current annual rate of interest is 7.1%. PPF scheme also provides a tax rebate.
As a parent, you plan to save for your children’s future. PPF schemes can fulfill this desire. There is no specific age for opening a PPF account. Thus, you can open a PPF account for your children from their birth. In this way, a corpus will be ready for their needs. After 18 years, the account can be transferred in your child’s name, and they can decide its future course.
Documents for opening PPF account for a minor
A parent can open a PPF account for a minor child by filling the account opening form. There is a requirement for the following details and documents for opening the account.
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Entire details of the legal guardian or parents, the child in the form
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Proof of age of the minor (Aadhaar card of the child or the birth certificate)
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A passport size photograph of the parent or the legal guardian
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KYC documents of the parent or the legal guardian
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A cheque for the initial contribution of Rs.500 or more
The way to open a PPF account for a minor
You can open a PPF account for a minor at a branch of the post office. You can also visit a designated branch of a bank to open an account. Fill the account opening form, attach the required documents and submit them at a branch. Banks also open a PPF account online instantly through the internet or mobile banking.
Tax rebate for PPF account of a minor
The investment amount, the interest generated, and the maturity amount are tax-free under the PPF scheme. Additionally, you can avail Rs.1.5 lakhs tax deduction for investing in the PPF scheme under Section 80C in the ITR. You can claim a cumulative tax rebate of Rs.1.5 lakhs for all of your PPF accounts (either personal or child’s).
Points to remember for a minor’s PPF account
- Only one among father, mother, legal guardian can open a PPF account for a minor.
- The minimum contribution is Rs.500, and the maximum contribution is Rs.1.5 lakhs for the PPF account of a minor in a year. However, you can deposit just Rs.100 at the time of opening the account. A person can contribute a maximum of Rs.1.5 lakhs towards multiple PPF accounts (whether personal or a child’s).
- It is mandatory to register a nominee when opening a PPF account for a minor.
- After 5 years of opening the account, premature closure of a minor’s PPF account is possible for their medical or educational expenses. Also, you can take a loan against the PPF account for the welfare of the child.
- It is mandatory to transfer the PPF account in the child’s name once he reaches the age of 18 years.
To conclude, the process for opening a PPF account for a minor is simple. Financial discipline from an early age is a good habit. Cultivate it in your children by opening a PPF account for them. Moreover, a PPF account for a minor is helpful because of the premature withdrawal option for a need.
