We have already talked so much about the benefits of opening PPF account as your saving account. The best part is that it’s a tax saving government scheme where money lock for 15 years. Another major benefit is for minors if account opened at right time and at the right age. PPF account gives liberty of saving up to 1.5 lakh per annum. Let’s see How PPF account beneficial for minors.
The Public Provident Fund rule allows you and your minor child to open an account for yourself. Till the time your child is minor, you are supposed to manage his/her account. One of those facts is that PPF account comes with a locking period of 15 years. But do keep in mind that saving for both accounts (yours & your child) in together could not exceed the limit of 1.5 lakh. And so, if you will open an account for your kid in an early stage, then by the time child become adult the account would have mature or be close to maturity.
Once your kid turns 18 years all the account accessing operations will be given to him/her. From that very moment, his/her signature will be required to withdraw or deposit money. And once an account becomes mature he/she can decide whether to close the account or to continue.
Seems like PPF account rules are majorly in the favor of minors. The advantage kids will avail before turning 18 years is in their favor. They can use PPF account with a shorter lock-in period as compared to normal locking period of 15 years. Another benefit is, PPF account has an EEE status. This means there is a tax break on the contribution, where the interest and amount withdrawn is tax exempt.
Postmaturity the account holder is left with 2 options. One is to take the money and close account or extend account with or without contribution. According to the extension rule the account can be extended for “n” number of times. But this n number of extension is in the block of 5 years each. This means if a child wishes to continue to earn interest with an existing account, the lock-in period will be of 5 years.
At the same time, the benefit of extending account with fresh deposit will develop a habit of saving money. He/she would start saving money from their very first job. And will also be eligible to claim tax benefit under section 80C of the IT Act on deposit.
The eligible account holder can withdraw money from PPF account from the 7th year onwards but is subjected to certain T&C. However, the withdrawal rules for an extended account are different from normal PPF account saving.
In extension years of PPF account, an eligible candidate is allowed to withdraw money once in a financial year. Withdrawing of maximum amount depends on whether you have extended it with or without contribution.
In case of without contribution extension of PPF account, one can withdraw any amount limited by the balance available in the account. And if the extension is with a contribution, then during 5 years block withdrawal amount cannot exceed more than 60% of the balance available.