Assured returns, safety of capital, tax deductions, and full tax exemption make the Public Provident Fund (PPF) the top choice for most salaried individuals. It commands the same attention from new parents who want to invest for their children’s future needs, especially education. While a PPF account can be opened for a minor, you need to keep a few important points in mind.
How PPF Account For A Minor Is Opened
PPF is a government-backed scheme that can be opened for a child by their parent or legal guardian. This account can be opened by only one of the parents on behalf of the minor. However, it is important to note that this cannot be opened by both the parents for the same minor child. Grandparents can only open this account as legal guardians if both the parents are not there.
Where Can You Open The Account
The PPF account for a minor can be opened with designated bank branches authorized to open an account or with your local post office.
What Is The Investment Limit?
PPF is a long-term investment. You can invest a minimum of Rs. 500 and a maximum of Rs. 1.5 lakh in a financial year. It is also a good way to utilize the small cash gifts your children get. But do remember to make that minimum payment of Rs 500 each year to avoid a minor penalty.
What Is The Tenure?
The PPF investment comes with a lock-in period of 15 years and matures 15 years from the end of the year in which account was opened. The tenure can be extended after maturity only for five years after the 15-year tenure is over. This extension can be done without any fresh contributions and the amount after maturity can earn the applicable interest.
The PPF account provides the double benefit of tax exemption and tax deduction. Interest earned in PPF is exempted from tax. The contributions made to the PPF account can be used to claim tax deductions for an amount up to Rs. 1.5 lakh. You can claim a maximum tax deduction of only Rs. 1.5 lakh even if you and your child both have a PPF account. Once your child grows up, they can claim the tax benefits under Section 80C of the Income Tax Act.