If you have not yet opened a Public Provident Fund (PPF) account for your children, do so soon. This will secure the future of your children and get many benefits.
A Public Provident Fund (PPF) account for children can be of great help. If you open a PPF account for your child at an early age, the account will have matured or near maturity by the time he or she attains adulthood. The lock-in period of this account is 15 years from the financial year in which it was opened. The amount in this account should not exceed Rs 1.5 lakh during any one financial year. Apart from the designated post office or bank branch, it can be opened online in some banks. It allows customers to transfer their PPF account from post office to bank or from bank to post office.
The PPF account of a minor can be opened or operated by the natural guardians (mother, father) or legal guardians in the absence of the natural guardians. Note that only one parent can open the account. Both the parents cannot open the account on behalf of the same minor. PPF account cannot be opened by the grandparents for a minor child unless they are the legal guardians after the death of the parents.
Know these important things before opening a PPF account for children
- One of the biggest reasons is the lock-in period of 15 years in a PPF account. Why should one open an account at a young age or for minors? After keeping the money for 15 years, the interest gets accumulated in the principal and then interest is earned on it, due to which a lot of money gets accumulated. In this, you get better interest on the investment amount. So if you are opening a PPF account for your child, when he is 5 years old, the PPF account will return the lump sum amount at the end of the tenure and can be used for educational purposes or can be extended further. This will help your child start something early in life. Elders who open a PPF account for their child should note that the amount should not exceed Rs 1.5 lakh in a financial year.
- Since PPF has EEE or exempt-exempt-exempt status, the contribution, interest earned on the principal amount, gets tax relief. Any withdrawal after the initial lock-in period of 15 years is free from taxation.
- Whether your child wants to continue with the PPF account after the maturity period of 15 years. He/she can either close the account or increase it by ‘n’ number of times for every block of five years. In short, it will provide your child with a choice whether to continue earning interest or withdraw the entire amount.
- The facility of partial withdrawal after maturity of an account is also different. While partial withdrawals are allowed from the 7th year onwards, the withdrawal rules for extended PPF accounts allow individuals to withdraw money once in a financial year, but it all depends on whether your child has contributed or Without this the account has been extended or not.
- If the PPF account is extended without contribution, then individuals will be able to withdraw any amount depending on the balance. However, if contributions are being made, only 60 per cent of the amount can be withdrawn during the new lock-in period of 5 years. These withdrawals can prove to be easier for your child and help support them through their first job or final year of education.
- Having a PPF account at an early age will create a urge among the youth to save more during their first job. Which is very important in today’s time. Further, if he/she has decided to contribute more to the PPF account after 15 years, the individual will continue to get benefits under Section 80C of the Income Tax Act.
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