A Public Provident Fund, or PPF in short, is a long-term savings scheme devised by the government to help Indian citizens invest and build a corpus for their long-term goals. PPF is generally looked as a means of a retirement fund but it is much more than that. The key advantage of a PPF is that the interest earned and the fund after maturity is completely tax-free.
According to the rules of the PPF set by the government, any eligible Indian citizen can apply for only one PPF in their lifetime. However, a parent can open a PPF account for their minor child as their legal guardian, which can serve as an excellent source for the child’s higher education or marriage when he or she becomes of that age.
Read on to find out how you can open a PPF account for your child and the key things that you should know about it.
Any parent or legal guardian can open a Public Provident Fund account on behalf of a minor, provided that they are resident citizens of India. Naturally, both parents cannot open two separate PPF accounts for their child. Only one of them is allowed to apply for a PPF account for the minor.
A PPF account can be opened at any designated bank or at any post office that has been authorised to receive applications for PPF.
Duly filled PPF form that includes details of both the parent or guardian as well as the minor.
KYC documents of the legal guardian or parent which includes ID proof and address proof like passport, PAN card, Aadhar card etc.
Photograph of guardian or parent.
Age proof of the minor
Initial investment of a minimum of Rs. 100/- via cheque.
Starting a PPF for kids is as simple as that. Submit the above documents and wait for the due process to finish and your child’s account to become active.
The minimum amount that has to be invested in a PPF for minors is Rs. 500 in a financial year, which is the same as that of an adult PPF account. The upper limit of investment per year is Rs. 1.5 lakh.
It is to be noted, however, that the maximum limit of Rs. 1.5 lakh is the total investment allowed for both the legal guardian or parent’s own PPF account, if it exists, as well as the minor’s account.
The tax exemption claimed for PPF investment under Section 80C is Rs. 1.5 lakh per annum. Again, this maximum limit of Rs. 1.5 lakh is the collective limit for all PPF accounts of the family, including minors.
Once the minor turns 18, the PPF account can be switched entirely to his or her name. Any further actions with respect to the PPF account have to be made by the new account holder. To do this, the person that turned major has to submit an application along with documents to the post office or bank where PPF was opened.
Partial withdrawals from a PPF can be made only after the PPF account turns seven years old. If the parent or guardian wishes to withdraw funds from the minor’s account, then they have to submit proof that the money withdrawn is going to be used for the minor’s benefit.
In case the guardian wishes to close the minor’s PPF account, they can do so only after 5 years, and for specific reasons. Only in cases where the minor requires medical treatment for a serious ailment, or cases where funds are required for higher education of the minor can the PPF account be closed. The necessary supporting documents have to be produced as proof.
If you want to invest in something that has very low risk, then the government backed Public Provident Fund is the way to go. If you’re a family looking to set up funds for the welfare of your children, then opening a PPF account on behalf of your children is one of the best ways to gather funds for their future expenses. Whether it is their higher education, marriage, or simply a way to create a backup fund, a PPF is the easiest and most convenient way to do so.