PPF for Children: The Public Provident Fund, or PPF, is often used by families who want a calm and steady way to save money for a child’s future. It is a long-term savings plan and a parent can open it in a minor child’s name. The parent or legal guardian manages the account until the child turns 18. After that, the child can take over and run it alone. Grandparents usually cannot open this account for a grandchild unless they are the legal guardian. The scheme also lets the account continue after the child becomes an adult, with the ex-minor taking charge by filing the needed papers again.
“A child’s PPF account functions largely like a regular PPF account, offering a 15-year tenure, government-backed returns, annual compounding, and partial withdrawal benefits under scheme rules. It is widely used by families as a disciplined long-term savings avenue for future goals such as higher education or marriage,” said Adhil Shetty CEO BankBazaar.
Who can Open it?
Only a resident individual can open a PPF account, either in their own name or in the name of a minor child for whom they are the guardian. A father or mother can open the account for the minor. Both parents cannot open separate PPF accounts for the same child.
The scheme also says a grandparent cannot open it while the child’s parents are alive. If the parents are no longer alive, or if a legal guardian has been appointed, then the account can be opened by that guardian.’
How much can go in?
The account must get at least Rs 500 in a year. The PPF scheme says the first deposit when opening the account can be as low as Rs 100, but the yearly total should not fall below Rs 500. At the same time, the deposit limit for PPF is capped at Rs 1.5 lakh in a financial year. That limit applies together to the guardian’s own PPF account and the minor child’s account. A nominee also has to be named when the account is opened.
Tax rules, returns and documents
PPF is popular because it has tax benefits too. The interest earned and the maturity amount are tax-free under the PPF scheme. The Income Tax Department says PPF deposits are tax-exempt under the EEE system and contributions can qualify for deduction under Section 80C. The total deduction under Section 80C, Section 80CCC, and Section 80CCD(1) cannot go beyond Rs 1.5 lakh.
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“The interest earned and the maturity amount are tax-free under the PPF scheme rules. However, the tax benefit is not unlimited; the contribution and deduction must fit within the applicable PPF and Section 80C limits, and the deduction is allowed only under the old tax regime,” said Pranav Sai S, Tax Expert at ClearTax.
“Taxpayers opting for the new tax regime, now the default regime, cannot claim this deduction,” said Ritika Nayyar, Partner, Singhania & Co. (Tax Partner). The Income Tax Department’s own guidance matches this, since Section 115BAC blocks the 80C deduction for individuals under the new tax regime.
How to Open and Account?
- To open the account, parents or guardians usually go to a post office or a bank that offers PPF.
- They need the account form, KYC papers for the guardian, a photo, proof of the child’s age such as an Aadhaar card or birth certificate, and the first deposit.
- The money can be put in by cheque or other accepted payment modes.
