Home / Money / Personal Finance /  Is interest on minor’s PPF account taxable?
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I am working with a multi-national company (MNC) and my Public Provident Fund (PPF) contribution is around 5 lakh. Can I open separate PPF accounts for my two minor children? Will the interest on those PPF accounts be clubbed with my income and is it taxable? Also, my wife is a doctor and contributes 1.5 lakh towards her PPF account. How can we manage investments in PPF ?

— Name withheld on request


We  presume that you are currently contributing approximately 5 lakh per annum as employee contribution towards Employee Provident Fund (EPF) account, and not to the PPF account (as mentioned in your query) by way of deduction from your salary. 

Thus, the maximum threshold limit (currently 1.50 lakh) of deduction under section 80C of the Income-tax (I-T) Act, 1961, is already exhausted, hence, no further tax deduction would be available for a contribution towards PPF. 

Additionally, income earned on the employee contribution to EPF in excess of 2.50 lakh (i.e., contribution of 5 lakh minus 2.50 lakh) shall also be taxable in your hands as per rules for taxation applicable to income from other sources.

Please note that as per the Public Provident Fund Scheme, 2019, an individual may open PPF accounts in their name, as well as in the name of each minor child. Thus, you may open the PPF accounts for both your minor children.  As per the scheme, PPF deposit by an individual is capped at 1.50 lakh per annum. Contributions made in minor’s account are also clubbed in the said limit. Hence, total contribution in all three PPF accounts (i.e., your and two minor accounts) shall be capped at overall limit of 1.50 lakh. The income earned from investment in the PPF account is exempt in the hands of the individual. 

Also, it is important to note that income earned by a minor child from the PPF account (except in case of a minor child suffering from a specified disability) will be clubbed and offered to tax in the hands of the parent whose income is higher.  As per provisions of section 10(11) of the I-T Act, interest accrued in PPF account where annual contribution does not exceed 5 lakh shall not be taxable. Accordingly, interest accrued for the annual contributions (up to 1.50 lakh) shall be exempt in your hands (including interest on minor PPF accounts which is clubbed in your hands, assuming you are the higher-earning spouse). You will need to appropriately disclose the entire PPF interest as exempt income in your personal tax return.

Further, your wife, being a separate taxpayer, may continue to deposit 1.50 lakh in her PPF account from her personal income. Interest income accrued from her deposits shall be required to be reported in her personal tax return appropriately as exempt income.

Parizad Sirwalla is partnerand head, global mobility services, tax, KPMG in India.

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