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Ppf

sanjay shah (properitor) (71 Points)

16 March 2015

Dear sir,

I am having an Individual PPF Account in my name in which I deposit Rs.150,000 every year and claim deduction of Tax U/s. 80(C). I am having a 10 years old Daughter for whom I would like to open a minor PPF Account and I will be her Natural Guardian in this minor account. I would firstly like to know that if I open a minor PPF Account in her name, can I deposit 150,000 each in both the PPF Accounts every year. As she is a minor, her account will be clubbed in my Individual Account. So can I deposit 150,000 each in both accounts every financial year. I know that I can claim only 100,000 U/s. 80(C) in my Individual Account, but I would like to know whether I can deposit 100,000 each in both the PPF Accounts every year.

Awaiting your valuable and haste reply at the earliest.

Sanjay Shah

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5 Replies

CA HAYEDAR SHAIKH (Practice ) (627 Points)
Replied 16 March 2015

Only one PPF account can be maintained by an Individual, except an account that is opened on behalf of a minor. Thus, PPF account can also be opened by either parent under the name of a minor. However, each person is eligible for only one account under his/her name.

If a parent invests in a minor child’s name, the income is clubbed with that of the parent who earns more. In some cases, a minor child may have a personal income, such as a cash prize in a competition or payments for commercials and events. There is a Rs 1,500 exemption per child per year for the income earned by investments made in the name of the children.

Please Note: Either father or mother can open PPF account on behalf of his / her minor child, but both cannot open the account for same child.

Finally,

Contributions to PPF accounts of even the spouse and / or children are also eligible for tax deduction.

hope it will suffice the purpose at your end.

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sanjay shah (properitor) (71 Points)
Replied 16 March 2015

Thks for your reply.My question was even though I invest 1.5lakhs in my name can i further put any amt rs 500 to rs 1.5 lakhs..You reply abt childrens income getting clubbed does not arise here as this interest(income )is tax free.

I hope now my question is clear.

Sanjay

CA HAYEDAR SHAIKH (Practice ) (627 Points)
Replied 16 March 2015

Please go through the following -

PPF Investment Limit for Minor gives a user max 1,50,000 INR. So this is indeed a great benefit for tax payers or business men who make good profits can now deposit in PPF Account for Minor. Although it cannot be clubbed with his or her savings as the max cap limit under sec80c is 1,50,000 and if the user has reached that limit, he cannot add the investment made in the minor account. But can always save for the future of the kid. Therefore PPF Minor Contribution can be from 500 INR to 1,50,000 INR.

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 17 March 2015

Hello,

An individual can invest a maximum of Rs 1.5 lakh in the PPF account in a financial year. So, Hello,

if sanjay chooses to be the guardian for his minor son's PPF account, both his account as well as that of his son will have a collective annual investment ceiling of Rs 1.5 lakh. At the time of opening the account, the guardian will have to declare the details of his individual PPF account and the two accounts will then be linked by the bank or post office.

Several people invest more than the maximum permissible limit for individuals via their minor children's PPF accounts. This is probably due to the technological challenges of identifying various accounts. However, this is against the rules and no interest is payable on the excess amount deposited. At maturity, they might get back only the principal amount.

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 17 March 2015

Can I deposit more than 1.5 lac in PPF account even if I don’t need income tax exemption ?

As per PPF rules, you are just not allowed to invest more than Rs 1.5 lac in your own PPF account or any other PPF account where you are guardian. So if you have 2 kids and you have opened PPF account in their names, you might be thinking that you can invest 1.5 lac in your own PPF and 1.5 lac in each kid PPF account so that you can enjoy tax free maturity income later for your kids PPF account . But I dont think its allowed, because as per PPF rules, the 1.5 lac limit is for an individual , not on per account basis .

But I have been investing more than 1.5 lac each year, already from many years !

A lot of investors who have been investing more than 1.5 lac in PPF each year. Due to technological challenges, it might be possible that no one stopped you from doing it, but in future if govt comes to know that you have been avoiding the rules, you might not get any interest on the excess amount, so you might get back only the principal amount at the time of maturity. A lot of Bank staff are also not clear on these rules.