Public Provident Fund, is a government-sponsored savings and investment scheme in India. It is known for its attractive interest rates, tax breaks, and low risk, making it one of the most popular investment options in the country.
Individuals can create PPF accounts in their name as well as on behalf of a juvenile or someone incapable. Parents can register a PPF account for their minor kid, which is typically regarded as a helpful way to start saving for the future. The PPF account stands out as one of the investing alternatives for children because of its attractive interest rates and tax advantages.
It is essential to remember that the parent or legal guardian will control the minor child’s PPF account until they reach the age of 18. As a result, once the minor reaches age, he or she can handle the account independently.
PPF Account Features:
- Investment Limits A minimum of Rs 500 and a maximum of Rs 1,50,000 per year can be deposited.
- The original length was 15 years. The subscriber may ask for an extension for one or more blocks of five years.
- The central government determines the interest rate every quarter. The current annual rate is 7.10%.
- Loans and withdrawals are authorised based on the account’s age and balance as of the given dates.
- Investments in PPF accounts are eligible for tax deduction under Section 80C of the Income Tax Act, up to a maximum of Rs. 1.5 lakh every fiscal year. Interest earned on PPF accounts is likewise tax-exempt.
- The nomination capability is accessible in the name of one or more individuals. The subscriber may also specify the candidates’ shares.
- The subscriber can request that the account be transferred to other branches/banks/post offices, and vice versa.
Key Things to Know About PPF for Minors
- Eligibility: Indian citizens can register a PPF account for their minor kid.
- There is no minimum age limit for minors. Even newborns can open a PPF account.
- Who manages the account? The account is managed by the minor’s parent or guardian until they reach the age of 18.
- Minimum and Maximum Investment: The minimum initial investment is Rs. 500, however, the minimum annual commitment is Rs. 500. The maximum amount you may invest in a fiscal year (including your personal PPF) is Rs 1.5 lakh.
- Tax Benefits: Investments in a minor’s PPF are tax deductible under Section 80C of the Income Tax Act.
- Maturity: The PPF account matures in 15 years. However, you may extend it in 5-year increments.
How to Open a PPF Account
PPF accounts can be opened at any approved branch of a licensed bank or post office. To start a PPF account, you must fill out an account opening form and provide the necessary papers, such as your ID and residence verification. Once you’ve opened a PPF account, you can make contributions at any time during the fiscal year. Contributions can be made online, via NEFT/RTGS, or in cash at a bank or post office.
The subscriber should not deposit more than Rs. 1.5 lakh per year since the extra cash will not generate interest nor be eligible for reimbursement under the Income Tax Act.
Things To Keep In Mind
- The payment can be deposited in a one-time sum or instalments.
- Interest is computed on the minimum amount (in the PPF Account) between the 5th day and the end of the month and is paid on March 31st every year.
- An account holder shall be entitled to prematurely close his account or the account of a minor or person of unsound mind who is the guardian on an application to the accounts office in Form-5, for any of the following grounds:
- Treatment of life-threatening sickness of the account holder, his spouse, dependent children or parents, on the provision of supporting papers and medical reports verifying such condition from the treating medical authority.
- Higher education of the account holder or dependent children upon provision of documentation and fee bills in confirmation of admission to a recognized college of higher education in India or overseas.
- If the account holder’s residency status changes, a copy of his or her passport, visa, or income tax return must be shown.
