A parent or legal guardian can open a PPF account in the name of a minor child. Parents manage these accounts until the child turns 18. You can invest up to 1.5 lakh annually, but this limit includes your own account. The scheme currently offers 7.1 per cent annual interest.

A parent or legal guardian can open a PPF account in the name of a minor child. | ChatGPT generated/Representative Image

Parents often start saving money for their children from an early age. Some prefer fixed deposits, while others choose government savings schemes or mutual funds. The idea is to build a fund that can help with education and other expenses in the future. The Public Provident Fund (PPF) is one such option. Most people know PPF as a long-term savings scheme, but parents can also open an account in the name of their minor child.

However, there are certain rules regarding deposits, withdrawals, and account management that parents should understand before investing.

Who can open a PPF account for a child?

A parent or legal guardian can open a PPF account in the name of a minor child. There is no minimum age requirement, so an account can be opened even for a newborn. The account remains in the child's name, but the parent or guardian manages it until the child turns 18.

Only one PPF account is allowed in the name of a child. Both parents cannot open separate accounts for the same child.

How much can parents invest?

The minimum annual deposit in a PPF account is Rs 500, while the maximum is Rs 1.5 lakh in a financial year. There is an important condition here.

If a parent has a PPF account and also manages a minor child's PPF account, the combined deposits in both accounts cannot exceed Rs 1.5 lakh in a financial year.

For example, if a father deposits Rs 1 lakh into his own PPF account, he can invest only another Rs 50,000 in the child's account that year. Opening an account for a child does not mean the parent gets an additional Rs 1.5 lakh investment limit.

What is the current interest rate?

PPF currently offers 7.1 per cent annual interest for the October-December 2026 quarter. The interest is calculated monthly and added to the account at the end of the financial year.

However, the interest rate is not fixed for the entire investment period. The government reviews PPF rates every quarter, so they can change over time.

What are the tax benefits?

PPF is popular because of its tax benefits. Eligible deposits can qualify for a deduction under the old income-tax regime, within the overall limit of Rs 1.5 lakh.

The interest earned is tax-free, and the maturity amount is also exempt from tax under the applicable rules.

However, parents cannot claim a separate deduction limit simply because they have opened another PPF account for their child.

When can the money be withdrawn?

PPF has an original tenure of 15 years, calculated from the end of the financial year in which the account is opened.

Partial withdrawals are allowed after the prescribed period, subject to certain conditions.

Premature closure is also permitted in specific situations, but restrictions and interest adjustments may apply.

When the child turns 18, they can take over the operation of the account after completing the required formalities. The account does not automatically close when the child becomes an adult.

Is PPF a good choice for children?

PPF can help parents build savings over a long period without taking stock market risks. However, it may not be suitable for every financial need.

The annual investment limit is restricted, the interest rate can change, and the money cannot be withdrawn freely whenever required.

Parents should also remember that education expenses may rise considerably over the next 10 to 15 years. PPF can therefore be one part of a child's savings plan, but families should also keep money aside for expenses that may arise before the account matures.