New Delhi: If Public Provident Fund (PPF) had a nickname, it would be Trust. Parents or guardians can open a PPF account and operate it on behalf of the minor. It can be opened only by natural or legal guardians of any minor.
PPF account for a minor can be opened at any post office or selected bank branches. It is backed by the government of India and, therefore, is a safe mode of investment. Currently, it offers an interest rate of 7.1%.
PPF calculator, interest rate, returns
Now say an account is opened in the name of a child who is 5 years old.
If Rs 50,000 is deposited in that account every year till he/she turns 20, it would provide a total amount of Rs 13.56 lakh. We assume the interest rate to remain at the current rate of 7.1%.
However, if one invests Rs 1 lakh every year, the total amount at the age of 20 will become Rs 27.12 lakh.
Now take a third scenario. The full tax deductible amount of Rs 1.5 lakh is deposited in the account every year. In this case, the account will have Rs 40.68 lakh.
This means, when the minor turns into an adult, this amount can be used for his/her higher education or even for funding any business that he/she might be interested in.
Can parents claim a PPF deduction for a child?
That’s not all. The guardian will also get tax benefits every year on the investments.
KYC documents of both the minor and the guardian opening the PPF account are mandatory. Proof of age of the minor must also be submitted.
The rules of deposit are the same as for an adult. It varies from just Rs 500 a year to Rs 1.5 lakh.
The deposit is income tax deductible under Section 80C of the Income Tax Act 1961.
An important feature of a minor’s PPF account is that it can be closed and the accumulated funds withdrawn for higher education needs of the minor. The lock-in period for a normal PPF account is 15 years.
Once the child attains the age of 18, the account must be transferred from the guardian.
Public Provident Fund or PPF is trusted by generations for making long-term risk-free investments. But did you know that you could even open a PPF account for your minor child to secure his/her future? Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
