Do you want to gift your minor child a PPF account. We will be trying to clear any of your queries arising regarding PPF account for Minors
Opening PPF account for Minor
Having said that, PPF account for minor is an effective tool to secure their future. If you have been consistently investing in PPF account of a minor for 15 years, the accumulated amount alone may serve the complete purpose of higher education or marriage of the minor kid when they grow old enough.
Who is eligible to open PPF account for Minor Child?
As per the PPF scheme, any guardian can open a PPF account for minor child. A guardian could be any of the following:
- Mother or the father of the minor child
- Legal guardian like grandmother, grandfather, uncle, aunt, etc., in cases where any of the parents is not alive
- A legal guardian in case the living parents are not capable of acting and operating an account
Documents required for opening PPF account for Minor
While opening a PPF account for minor child, proof of identity and residence of the parents/legal guardian would be required. Along with it, any of the following documents of the minor would be required:
- Certificate of Birth of the Minor
- School leaving Certificate of Minor, duly stamped by the principal of the school
How much can you invest in a PPF account for Minor?
The maximum limit for PPF limit for all, irrespective of age group is Rs 1.5 lakh, for which the account holder would enjoy the rate of interest and tax benefits. Hence, the maximum you can invest in the account of a minor is Rs 1.5 lakh. At the same time, if you are investing in the PPF account of your minor child, you should be aware that just one guardian/parent can claim the contributions for tax exemptions.
For example, if both the parents have a PPF account and a PPF account for their minor child, parents can claim the investment to their account for tax exemption and either of the parents can claim the contributions for minor’s account for tax exemption.
In all, you can claim only Rs 1.5 lakh for tax exemption whether from your own PPF account or from the account of a minor or both.
Note :- You can deposit only Maximum Deposit Limit per PAN Card. For example current maximum limit is Rs 1.5 Lakhs and you have opened PPF account for yourself and your minor kids then you can deposit a maximum of Rs 1.5 Lakhs in all the accounts in total. Your wife can deposit rs 1.5 Lakhs individually since she has her own PAN card.
What if you invest more than Rs 1.5 lakh to the PPF account of a minor?
This is a tricky situation. A lot of people invest in PPF just to enjoy the tax benefits. It is noteworthy to mention that PPF scheme does not permit an account to be invested more than the specified limit. We have however come across people who have been investing more than the limit amount and no one stopped them ever.
However, if you are caught under the eye of government agencies, you may lose you interests on maturity. So it is always better to not exceed the limit of investment. If you have excess liquid money, you can think about other tax saving investment tools such as life insurance
Do you need to declare your personal PPF account at the time of opening a PPF account for minor child?
Yes, at the time of opening PPF account for your minor child, you, as the guardian/parent of the child need to declare your personal PPF account details. As per the scheme, any individual cannot have more than one PPF account except for the PPF account of a minor child. Hence, it is always better to declare your PPF account at the time of account opening.
Even if you are opening a PPF account for your second child and you and your first child already have a PPF account, you should mention both the accounts at the time of account opening. The idea is, declare all the PPF accounts you are contributing towards at the time of a new account opening.
What are the possible conditions if the Minor PPF account holder becomes a Major?
There could be two possible situations here. A PPF account matures in 15 years.
Case 1 – If the account matures before the child turns 18 years of age: If the PPF account matures before the child turns 18 years of age, the parents have two options. First option is to extend the investment for another 5 years term.
The second option is to withdraw the money from PPF account. If the guardian withdraws this money before the child turns a major, this money would belong to the guardian and would be treated as guardian’s money. If the guardian reinvests this money anywhere, it would be treated as guardian’s investment and the guardian would be taxed accordingly and this will have nothing to do with the child.
Case 2 – When the minor child attains an age of 18 years at the time of maturity: In this case, the money would belong to the child (account holder), since he has become an adult now and is considered fit to manage the account. In this case, the money would be used by the child (account holder) and can be withdrawn or reinvested.