PPF or Public Provident Fund is a popular small savings scheme that offers income tax benefits under Section 80C. It is also a good instrument towards long-term savings with both the interest and maturity being tax-free. An individual can open a PPF account a child's name in the capacity of guardian of the minor. But remember that a PPF account cannot be opened in joint names. When the minor turns 18, he/she can operate the account. Loans and other benefits like partial withdrawals from the minor's account are also allowed.
Key things to know about a PPF account in the name of a minor:
1) An individual on his or her own or on behalf of a minor of whom he/she is the guardian can open a PPF account in the name of the child with an initial amount of a minimum of ₹100. The minimum amount that has to be deposited in a year is ₹500 and maximum ₹1.5 lakh.
2) If the guardian/parent already has a PPF account in his/her name, remember that the maximum amount that can be deposited in the guardian/parent account, including child’s account, is ₹1.5 lakh per year.
3) If the amount invested in the minor’s PPF account is from the income of the parent/guardian, the parent/guardian include it under Section 80C of the Income-tax Act to get income tax benefits.
4) When the minor turns 18, an application can be submitted to change the status from minor or major. The operation of the account can be handled by him/her.
5) The depositor can submit a revised application along with the documents required and the signature of the depositor who has become major shall be attested on the revised application form by the guardian who opened the account.
6) A depositor can make partial withdrawals from PPF account, starting from the seventh year. If the withdrawal is sought to be made from the minor's PPF account, the guardian has a make a declaration that the money is required for the use of the minor.
7) In specific cases, the depositor can seek to close the PPF account of a minor of whom he is the guardian.
8) The request can be made only after completion of five years on grounds that the amount is required for medical treatment of the account holder on production of supporting documents from competent medical authority.
9) PPF account of a minor can also be closed prematurely after five years of account opening if the amount is required for higher education of minor account holder.
10) Loans from the minor's PPF account are allowed provided the guardian makes a declaration that the money is required for the welfare of the minor.