As per the guidelines, an individual can open only one PPF account. However guardian / parents can open a PPF account in their minor child name. What are such specific guidelines on opening a PPF account in the minor's name? What are the benefits and limitations if you wish to open Public Provident Fund (PPF) on your minor child's name? Is there specific limitations in taxation?
Who is a minor?
Any child who has not attained the age of 18 years is termed as minor. Don’t laugh that I am telling you small things, I want to make it clear before I get into the actual topic J
Can Parent or Guardian open PPF account on behalf of minor child?
Minor cannot open a PPF account on his own. However, as per guidelines, Guardian or Parents can open a PPF account on his behalf. Generally in case parent is incapable or in case parents are not their, guardian can open a PPF account on behalf of the minor child.
How to Open a PPF Account on your Minor Child Name?
A parent or guardian who wants to open PPF account need to give declaration, including PPF account he or she is holding now or earlier. It includes PPF account no. bank or post office address where it is opened etc. Specify clearly in the application form that this is on behalf of child name. The process is a simple and PPF account in your minor child's name would be opened like any other PPF account.
What is the investment limit of PPF account opened in the minor child's name?
The total amount that can be invested in all PPF accounts put together, including PPF created in the minor child's name is Rs 1.5 Lakhs (effective Financial year 2014-15 onwards). Means, you cannot have a special amount of investment limit for the PPF account opened in the minor child's name. Also total claim for such guardian or parent under section 80C is as usual limited to Rs 1.5 Lakhs (effective financial year 2014-15 onwards) and no additional exemptions available.
What happens during the maturity of PPF account?
The PPF account maturity is 15 years.
- If the child has attained 18 years of age and PPF account matures after this, the accumulated PPF account would become his income. He can close the PPF account or extend for another block of 5 years. If he invests the maturity amount in any other bank FD, interest would become his income.
- If the child has NOT attained 18 years age and PPF account matures before this, the accumulated PPF account would become the income of a parent or guardian. A parent or Guardian can close his PPF account or extend for another block of 5 years. If guardian or parent closes the account and invests such amount in any bank FD, the interest received would become guardian/parent income only.
How to get maximum benefit by opening a PPF account in the minor child's name?
PPF provides 8.7% interest which is tax free. This is a good way to have child investment plan. While child father would have already opened a PPF account for tax benefit claims u/s 80C, one more account can be opened by mother on behalf of their minor child and vice versa. This way, parents can save Rs 3 Lakhs (Rs 1.5 Lakhs + Rs 1.5 Lakhs) and get 8.7% tax free returns which can be used for child education or for their marriage in future. There are almost zero investment options which are low risk and provide 8.7% tax free returns at maturity, hence PPF ranks high among all other options.
Conclusion: Parent or Guardian can open a PPF account in the minor child's name. This is one of the best ways to plan child education plan or planning for their marriage. If you are a low risk investor and want to get good tax free returns in the long run, you can open a PPF account on your own or on behalf of your child to enjoy such benefits.
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How to Open A PPF Account on your Minor Child Name
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Dear Suresh ji,
My child ppf account is matured and he is still a minor.When I approached the SBI bank,the manager told me that you cannot close the account.only your child can do it after he will become major.so you extends it for 5 years.Pls suggest what to do.
Since your child is not major, you can extend for another block of period. You would get better interest in PPF compared to FD. You can extend Rajneesh
Dear Suresh ji,
But I need money for child education.so what is the rule.
Dear Suresh ji,
when I try to open a/c for my two kids (3 month old) in Punjab national bank, they said the minor should be 10 years old or above. Is it so ? please clarify.. thanks in advance
I don’t think so, pls approach ICICI Bank or HDFC Bank.
Does it make sense to have a PPF account in thename of a minor studying in India, while parents currently ar NRIs and hence do not have an active PPF account?