A Child Savings Plan is a savings plan that allows you to invest funds to meet your child’s future financial obligations, like higher education, marriage, or any other specified expenses. A child saving plan allows you to build corpus funds to meet your child’s future financial requirements, along with insurance coverage. It offers dual benefits of insurance & investment, where your child will receive the amount deposited in the corpus in case of your sudden demise in a lump sum. Additionally, it also builds a corpus fund to meet the different milestones of your child.
One of the examples includes Public Provident Fund (PPF), which can be opened for self & minors as well. A Public Provident Fund 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 lump sum. The amount deposited, maturity amount & interest amount are totally exempt from taxes.
Steps to Open a PPF Account for Minors
The initial requirement of opening a PPF account is to hold a savings account with the respective bank. After which, the participating bank will offer mobile & internet banking services. There are two modes to get the account opened, namely, online & offline, to initiate your Child Saving Plan:
Steps to Open a PPF Account Online
Provided are the steps to open a PPF account for minors via online mode:
Step 1: Log in to the bank’s web portal for internet banking by logging in online.
Step 2: Click the option “Open a PPF Account”.
Step 3: Fill out the application form with the necessary details & verify them before submitting.
Step 4: Mention the feasible amount to be deducted each year towards the PPF account. Additionally, it provides an auto-debit option to deduct the specified amount automatically from your respective bank account at a certain pre-specified date.
Step 5: After reviewing, submit your application. An OTP will then be received on the registered mobile number for authorisation purposes.
Step 6: Enter the OTP, after which a success message will be received via SMS & email.
Steps to Open a PPF Account Offline
Provided are the steps to open a PPF account for minors via offline mode:
Step 1: It is mandatorily required to hold a savings bank account with the participating bank. Gather all relevant documents required to open a PPF account.
Step 2: Visit the nearest branch of your respective bank to get the PPF account opened.
Step 3: Fill out the application form provided by the bank representative & submit it along with the relevant documents required.
Eligibility Criteria
Provided are the eligibility parameters to be met to open a PPF account for your child:
- The applicant should be an Indian resident.
- The guardian or parent can get the account opened in the name of the minor.
- While opening the PPF account, it is required to register the nominee mandatorily.
- The grandparents are not allowed to operate the PPF account unless they become the guardians themselves in case of the demise of the minor’s parents.
- The minimum amount to be contributed is INR 500, & the maximum amount to be contributed is INR 1.5 lakhs to the PPF account of a minor.
Documents Required
Provided is the list of documents required to be submitted along with the application form:
- KYC documents of the parent or guardian of the minor, including PAN card, passport, etc.
- A passport-size photograph of a parent or guardian
- Age-related proof of the minor child, i.e. either a birth certificate or an Aadhaar card.
- An account-payee cheque for the initial contribution to the PPF account
Things to be considered before opening a PPF account for a Minor Child
Provided are the things to be considered before opening a PPF account for a minor child:
- The minimum amount to open an account for a minor is INR 100, & no maximum limit.
- For parents, the minimum deposit amount is INR 500, & the maximum amount is INR 1.5 lakhs.
- It cannot be opened in joint names, i.e., one account for one child only.
- The parent or guardian, whoever is depositing funds in PPF for their child, should take into account the same under section 80C of the Income Tax Act, 1961, to avail of tax benefits.
- An application is required to be submitted to transfer the ownership of the account from the guardian’s name to the minor’s name, along with the signature of the depositor & documents required when the minor turns 18.
- You are allowed to close the account prematurely if the amount has been exhausted due to its use for higher education or medical emergencies.
- It allows for partial withdrawals once the 7-year period has been completed from the date of account opening, provided a declaration is submitted that the funds to be withdrawn will be used for minors only.
If you want to invest in a child education plan, which is also a type of Child saving plan, the best way is to open a PPF account for your minor child, as it is considered a safe investment option. They are safe, as backed by the Government of India, hence have low risk & are considered to be the best investment plan for a child’s financial future.
Conclusion
PPF for minors is a great initiative started by the Government of India to invest funds for the financial future of your children. This plan is less risky as it is backed by the government, & allows either parent or a guardian to open the account on behalf of the minor. 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.