Child’s PPF account: Parents cannot deposit ₹1.5 lakh each — Know the combined limit

Opening a Public Provident Fund (PPF) account for a minor can help parents build long-term savings for a child’s education, marriage or other financial goals. However, parents should remember that the ₹1.5 lakh annual PPF contribution limit is not available separately for every account maintained by a family.

The PPF rules cap the total contribution at ₹1.5 lakh in a financial year across the PPF account of the subscriber and accounts opened for their minor children. This means parents cannot treat a child's PPF account as an additional ₹1.5 lakh contribution limit.

Can both parents deposit ₹1.5 lakh in the child's PPF?

No. The ₹1.5 lakh annual ceiling applies to the relevant PPF contributions taken together. Therefore, if both parents contribute to a minor child's PPF account, their combined contribution cannot exceed ₹1.5 lakh in that financial year.

For example, if the mother deposits ₹1 lakh into the child's PPF account, the father can contribute only ₹50,000 to that account during the same financial year.

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Similarly, depositing ₹1.5 lakh each would result in total contributions of ₹3 lakh, exceeding the applicable annual PPF limit.

Parents should therefore track contributions made by both individuals rather than assuming that each parent gets a separate ₹1.5 lakh limit for the child's account.

What if the parent also has a PPF account?

The same ₹1.5 lakh ceiling becomes particularly important when a parent maintains their own PPF account while also contributing to a minor child's account.

For instance, if a parent contributes ₹1 lakh to their own PPF account during a financial year, only ₹50,000 can be contributed to the minor child's PPF account, subject to the applicable rules.

The limit is therefore not simply about how much can be deposited into one particular account. Parents need to consider the eligible PPF contributions together while planning their annual deposits.

Kerala High Court case involving children's PPF accounts

The importance of understanding the rules can also be seen in a Kerala High Court case. The court ruled in a matter where a mother opened PPF accounts for her children in 1999 and continued making contributions to the accounts even after they turned 18, until 2005 and 2007, respectively.

The case involved the treatment of contributions made after the children attained majority and the applicable PPF contribution limits. The Kerala High Court examined the account statements and the relevant rules in deciding the matter.

The case highlights why parents need to pay attention not only to the annual contribution ceiling but also to what happens when a minor PPF account holder turns 18.

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What are the tax implications?

Contributions to a PPF account can qualify for the applicable Section 80C tax benefit, subject to the overall limit prescribed under tax law.

The interest earned on PPF is tax-free under the applicable rules. However, the tax-free nature of PPF interest does not remove the annual contribution ceiling.

Why should parents track the limit?

The contribution limit becomes particularly important when both parents contribute towards a child's PPF. Without tracking the combined deposits, families could inadvertently make contributions beyond the permitted ceiling.

Parents should maintain records of deposits made into their own PPF account as well as minor children's accounts and ensure that the total remains within the applicable annual limit.

The key takeaway is simple: a child's PPF account does not create another ₹1.5 lakh annual contribution allowance for the family. The ₹1.5 lakh ceiling must be considered collectively for the relevant PPF accounts.

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