Have you ever wondered how to build a safe and stable retirement fund for your children without worrying about market ups and downs? The Public Provident Fund (PPF) Scheme, launched in 1968 by the National Savings Organization, was designed with exactly this in mind—to encourage small savings and steady investment growth. With guaranteed returns and protection from market volatility, PPF is a favourite choice for investors who prefer a low-risk path to build wealth for their children. Let’s find out more about it.
What is PPF for Children?
The Public Provident Fund (PPF) for minors is one of the most popular long-term investment options offered by the Indian government. It allows parents or legal guardians to open a PPF account in their child’s name, helping them build a secure financial future. The PPF is a great way to save for important milestones in a child’s life, such as higher education or marriage, as the money invested grows over time with guaranteed returns.
While each Indian citizen is allowed to open only one PPF account in their own name, a parent or guardian can open and manage a PPF account on behalf of their minor child. This means that even young children can start saving early, benefiting from long-term growth until they are old enough to take over the account when they turn 18.
What are the Benefits Of Opening a PPF Account?
Here are the reasons to invest in a PPF account for your child.
- Risk-Free Interest Rate
One of the biggest advantages of a PPF account is its risk-free interest rate. You earn an attractive 7.1% per annum, and since the Central Government backs it, you don’t have to worry about market fluctuations or any risk to your principal amount.
- Compounded Interest
The interest on your PPF balance is compounded annually, which means that your money grows even faster over time. The interest is credited to your account every year on March 31st, giving your savings a significant boost each year.
- Tax Benefits
Another great feature of the PPF is the tax relief it offers. Under Section 80C of the Income Tax Act, you can claim deductions for investments up to Rs 1.5 lakh annually. This helps you save on taxes while simultaneously building a retirement or savings fund.
- Long-Term Investment
The PPF is a long-term investment with a lock-in period of 15 years. This ensures that your savings grow steadily over time without the temptation to withdraw funds early. It’s a great way to stay disciplined and focused on long-term financial goals like retirement, education, or marriage.
- Loans Against PPF Balance
If you need liquidity, you can take a loan against your PPF balance between the 3rd and 6th financial year of the account. This option provides you with financial flexibility in case of an emergency while still allowing your PPF investment to grow.
Eligibility For Opening PPF Account
To open a PPF account for a minor, the following conditions must be met:
- The account can only be opened by an Indian resident.
- A guardian must open the account on behalf of the minor child. This can be either a natural guardian (like a parent) or a legal guardian.
- Grandparents cannot open or manage the account unless they have been appointed as the legal guardian after the parents’ passing.
- A nominee must be designated when opening the account.
- In a single financial year, the total contribution to the minor’s PPF account must be between Rs. 500 and Rs. 1.5 lakh (this amount can be contributed by the family as a whole, not just one person).
Documents Required To Open PPF Account
Here are the documents required to open a PPF account.
- PPF Account Opening Form: Available at any bank branch or on the Indian Post portal.
- ID Proof: You can submit one of the following documents: an Aadhaar card, PAN card, Voter ID card, Passport, or Driver’s license.
- Address Proof: Any of the following documents will work, such as an Aadhaar card, Telephone bill, Ration card, or Electricity bill.
- Photo: Two Recent Passport-Sized Photographs.
- Pay-in Slip or Cheque: You can use a pay-in slip to transfer funds to your PPF account at the bank branch or a signed cheque made out in favor of your PPF account.
- For a Minor: A birth certificate may be required as proof of age.
What are the Steps to Open a PPF Account for Minors?
Though you can open a PPF account for minors via offline and online methods, let’s discuss the steps for both to ensure a simple and hassle-free PPF account opening.
- To open a PPF account online, log into your internet banking or mobile banking platform. Once logged in, look for the option that says “Open a PPF Account” and click on it.
- If you’re opening the account for your child, select the option for a “minor”. Next, fill in the required details in the application form and carefully verify the information you’ve entered.
- After that, you’ll need to specify the amount you plan to deposit into the PPF account for the entire financial year.
- To make it easier, you can set up standing instructions so that the specified amount is automatically debited from your savings account and credited to your PPF account at regular intervals, according to your preference.
- Once you’ve filled out all the information and set up the standing instructions, submit the application. You will then receive an OTP (One-Time Password) on your registered mobile number. Enter this OTP to confirm the transaction and verify your identity.
- After entering the OTP, your PPF account will be successfully created. A confirmation message will appear on your screen, and you will also receive an email with all the account details sent to your registered email address.
Offline Method:
If you are not satisfied with the online method, you can also open a PPF account for your child via the offline method. Let’s look at the steps.
- In the first step, you will need to fill up the PPF application form with relevant information. The form will ask for basic details such as your name, address, contact information, and details of the guardian (if opening an account for a minor).
- Next, you’ll need to gather all the necessary documents to open the account. These typically include identity proof (like an Aadhar card or PAN card), address proof (such as an electricity bill or passport), and age proof (in case of a minor).
- Once you have the form filled out and documents ready, visit the bank or Post Office where you would like to open your PPF account.
- At the bank or Post Office, submit your completed PPF application form along with the supporting documents to the branch representative.
- The representative will verify the information and help you complete any remaining formalities.
Conclusion
So, there you have it! If you’re looking for a low-risk investment option, the government-backed Public Provident Fund (PPF) is a great choice. It’s especially ideal for families who want to save for their children’s future needs. By opening a PPF account in your child’s name, you can build funds for important expenses like their higher education or wedding or simply create a financial safety net for them. Furthermore, PPF is a simple and reliable way to start planning for the future, which offers a secure way to grow savings over time.
