#FinancialBytes: Opening PPF account for minors? Here's all about it
The Public Provident Fund (PPF) is one of the most-preferred long-term tax-saving investment options for both salaried and non-salaried individuals. One of the best features of the scheme, which is run by the government, is that PPF accounts can also be opened for minors. However, many people have doubts about it. So, here's all you want to know about opening PPF accounts for minors.
PPF is a savings-cum-tax-saving scheme offered by the central government. It was introduced by National Savings Institute of the Finance Ministry in 1968. As it is fully guaranteed by the government, it is also among the safest instruments. The PPF scheme has a 15-year lock-in period and offers an interest of 8%. The deposits made towards it can be claimed as tax deductions.
One can invest any amount between Rs. 500 (minimum) and Rs. 1.5 lakh (maximum) in the PPF scheme in a financial year. The amount can be deposited in lump sum or up to 12 installments. The minimum opening balance is Rs. 100. It has a 15-year maturity period, but it can be extended, each time for five years. Premature closure, however, isn't allowed.
One can make premature withdrawals from the 7th financial year of their PPF account. The maximum partial withdrawal amount is 50% of the PPF balance at the 4th financial year-end or 50% of the balance at the previous financial year-end, whichever is lower. Accountholders can also take a loan on their PPF. The facility is available only between the 3rd and 6th financial years.
As per rules, a PPF account for a minor can be opened by their father or mother, or any guardian under the law (grandfather, grandmother, uncle, aunt, etc.) in case the parents aren't alive or if the surviving parents are not capable of acting.
While a parent/guardian can open a PPF account in a minor's name, unlike a regular PPF account, they cannot deposit Rs. 1.5 lakh in it. An individual is allowed to deposit a maximum of Rs. 1.5 lakh on their behalf and a minor's behalf. Simply put, the combined contribution of the minor and their parent/guardian towards the PPF scheme cannot exceed Rs. 1.5 lakh.
If the PPF account matures before the minor turns 18, their parent/guardian can either choose to extend it by 5 years or withdraw the money. However, if it matures after the minor becomes an adult, then they can take their own decision as a major.