Public Provident Fund (PPF) For Minors: Key Eligibility, Required Documents & Tax Benefits
The Public Provident Fund (PPF) is one of the most trusted investment options in India, known for its safety, reasonable returns, and tax-saving benefits. While adults have long leveraged this scheme, it also offers the opportunity for minors to start saving early with the help of a guardian. This article provides a detailed guide on how parents or guardians can open a PPF account for minors, the documents required, eligibility criteria, and the taxation benefits associated with it.
What is the PPF Scheme?
The PPF scheme was introduced by the National Savings Organisation in 1968 to promote small savings among the Indian population. It is a government-backed savings scheme, making it one of the safest investment options available. PPF accounts offer tax-free returns and help in long-term wealth creation. Not only adults, but minors too can benefit from this scheme, but the account must be operated by a guardian until the minor reaches adulthood.
Eligibility for PPF Account for Minors
To open a PPF account for a minor, certain eligibility criteria must be met
- The minor must be an Indian resident.
- The account must be opened by one of the guardians, either a natural or legal guardian (not the grandparents unless they are legal guardians).
- The guardian must be a legal representative until the minor turns 18.
- A nominee must be appointed while opening the account.
- Only one PPF account can be opened either in the name of the minor or the guardian.
Parents or guardians can open a PPF account for minors at designated post offices or banks that are authorised to operate these accounts. The process is simple and requires the submission of certain documents.
Documents Required to Open a PPF Account for Minors
The following documents must be submitted by the guardian to open a PPF account for a minor:
- KYC documents of the guardian (such as Aadhaar, PAN card, and photograph)
- Birth certificate or Aadhaar card as proof of age for the minor
- Details of the guardian and minor in the account opening form
- Initial contribution cheque (minimum Rs. 500)
One of the most significant advantages of the PPF account is that the interest earned and the maturity amount are completely tax-free. Under Section 80C of the Income Tax Act, contributions made to a PPF account are eligible for a tax deduction up to Rs. 1.5 lakh annually. However, it is important to note that only one account, either of the minor or the guardian, can avail this tax deduction.
Things to Consider Before Opening a PPF Account for a Minor
Before opening a PPF account for a minor, here are a few key points to consider
- The minimum amount required to open the account is Rs. 100. However, the annual contribution must be a minimum of Rs. 500.
- The maximum contribution allowed is Rs. 1.5 lakh annually, which can be made collectively in both the minor’s and the guardian’s accounts.
- If the money invested in the PPF account belongs to the guardian (from their income), it can be included under Section 80C for tax benefits.
- Once the minor turns 18, the account must be formally transferred from the guardian to the individual. The guardian must provide the necessary documents and signatures to make this transfer possible.
PPF accounts, including those for minors, come with certain restrictions. The account can typically not be closed prematurely until after five years. However, under specific conditions
- The amount can be withdrawn for the medical needs of the account holder.
- It can also be used for higher education after the completion of five years.
(Disclaimer: The information provided in this article is for general informational purposes only. It is not intended as financial advice and should not be considered as a substitute for professional financial guidance. Readers are advised to consult with a financial advisor or relevant authorities before making any investment decisions. The content is accurate as of the date of publication, but the details may be subject to change based on government policies and regulations)