PPF for Children: A Smart Way to Secure Your Child’s Future

To secure the future of a child, parents generally invest funds in child-oriented life insurance plans. While looking for the Best Child Investment Plan, parents should consider the future financial requirements of a child by providing dual benefits of savings & insurance, hence leading to the creation of wealth. The corpus accumulated can be used for a child’s education, marriage, or any other additional requirements, even in the absence of a parent. 

One of the examples includes Public Provident Fund (PPF), which can be opened for self & minors as well. A PPF is a type of long-term investment plan backed by the government of India, offering attractive interest rates along with returns. The amount to be deposited in the fund ranges from INR 500 to INR 1,50,000 each financial year, either in EMIs or a lump sum. The amount deposited, maturity amount & interest amount are totally exempt from taxes. It offers secure & stable returns as they are not market-linked. 

Things to be considered while choosing a Child Investment Plan

The following are the things that should be kept in mind while choosing a child investment plan:

• Select those child investment plans which offer long-term capital returns & are already booming in the market.
• Check the reputation & stability of the investment company, or it should be government-supported, to ensure the investment’s financial security from any unforeseen event.
• Look out for an investment plan amongst educational plans for children, as education is considered to be the most important factor in your children’s future.
• In case of any potential financial emergency situation in future, there should be flexibility in terms of deposits & withdrawals & tax exemption benefits.

Objective of opening a PPF Account for Minors

Often, parents look for the Best savings schemes for the better financial future of their children. Indian parents do prefer maintaining a PPF account as it is tax-free, backed by the government, & ensures guaranteed returns. The following are the objectives of opening a PPF account for minors:

• Long-term Wealth Creation:

This account helps build a huge corpus fund throughout the long investment period.

• Financial Security of the Child:

It includes parents to invest a certain amount of funds in PPF, which will help create a corpus to meet the future financial obligations of your child.

• Tax Benefits: 

The premium amount paid is eligible for a tax deduction maximum of INR 1.5 lakhs.

Steps to Open a PPF Account for Children

There are two ways to get the PPF account opened for children, i.e. online & offline. Let us go through them:

Online Mode

• Log in to your mobile or internet banking. Click on the option “Open a PPF Account”.
• Choose the option “Minor” as you are opening this account for your child.
• Fill out the details required in the application form & review the same.
• Mention the desired amount to be deposited into the PPF account for the particular financial year.
• Also, you can provide a standing instruction to make an auto debit from your savings account to the PPF account.
• After clicking the tab “Submit”, an OTP will be received on your registered mobile number.
• Provide this OTP to verify & confirm the initiated transaction.
• The PPF account is now successfully created, for which you will receive a confirmation message along with an email.

Offline Mode

• • Fill out the PPF account opening form, including name, contact details, address, guardian details, etc.
  • Gather all the required documents, such as an Aadhar card, PAN card, passport, electricity bill, etc. 
  • Visit your nearest post office or bank along with all such documents to get the PPF account opened.
  • Submit the duly filed application form along with the documents.
• The bank representative will then verify the details provided.

Benefits of Opening a PPF Account for Minors

Provided are the benefits of opening a PPF account for minors:

• Risk-Free Interest Rate

Being backed by the Government of India, it is considered to be a risk-free investment plan, which offers a rate of interest of 7.1% per annum. These investments are not affected by market fluctuations, hence keeping the principal amount safe.

• Compound Interest

The total balance of PPF at the end of the year gets compounded on an annual basis, resulting in the growth of funds. Also, the interest amount gets credited to the PPF account on the 31st March every year, increasing the savings amount.

• Taxation Benefits

It allows a tax deduction on the amount deposited in the PPF fund, up to INR 1.5 lakhs u/s 80C, resulting in tax savings on retirement funds.

• Long-Term Investments

It is considered to be a long-term investment plan with a 15-year lock-in period, ensuring steady growth over a period. This way it creates a sense of discipline, while focusing on building a corpus for retirement, education or marriage.

• Loan Against PPF Balance

This plan allows you to avail of a loan against the PPF balance at any time between the 3rd & 6th financial year. This plan offers you flexibility while helping funds grow in an emergency situation.

Rules to open a PPF Account

Provided are the rules to get a PPF account opened by a parent for their children:

• This account can be opened by an Indian resident.
• Either a parent or a legal guardian can open & operate this account for a minor till the time they attain majority.
• This account does not allow for opening a joint account by an adult & a minor.
• In case of the death of parents, grandparents are allowed to open a PPF account for their grandchildren, if they become the legal guardian.
• The amount of the deposit can be made in instalments or in a lump sum.
• The maximum amount that can be deposited into a minor PPF account is INR 1.5 lakhs.
• A nominee has to be registered at the time of account opening.
• The minimum amount of contribution is INR 500.

Conclusion

Investment planning for children should start at an early stage to ensure that their dreams are converted into reality. PPF for minors is a great initiative started by the Government of India to invest funds for the financial future of your children. It helps mobilise your small savings by investing to get prompt returns along with tax benefits. It lets children learn the importance of savings at an early age, which will lead to building a strong financial future for themselves.