If you want to save for the future of your children, then you can invest in PPF account. You can get good returns by investing in it. Also, it can be extended for 5-5 years of 15 years. Because the PPF account rules allow you to open an account for yourself and your minor child. Some reasons have also come to the fore as to why you i.e. the parents should open a PPF account for your child.
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PPF account comes with a lock-in period of 15 years from the end of the financial year in which the account is opened. So if you open a PPF account for your child early in his life, by the time he starts working or becomes a senior (i.e., turns 18), his account would have matured However, do note that you can deposit the total amount in both the accounts (i.e., yours and your child’s) together.
As per the existing laws, it should not exceed Rs.1.5 lakh in a financial year. This is also the maximum amount that you can put into a PPF account in a financial year and avail of the Section 80C tax exemption. This section 80C tax benefit is available only if you opt for old tax regime while filing income tax return.
Your child will get this benefit
Once your child turns 18, he can decide to continue with the PPF account. He will be able to use PPF account with a shorter lock-in period of 5 years as compared to the normal lock-in. 15 years which a normal investor would have to face on opening a new account. This is beneficial as currently the PPF account enjoys EEE status, ie contributions are tax exempt, interest is tax free, and withdrawals are also tax free. PPF is considered a good way to invest, but the long lock-in period of 15 years poses a problem. This deficiency will go away/reduce to a great extent for your child.
Partial withdrawal facility
As per PPF rules, you get the facility to withdraw money from your PPF account from the 7th year onwards subject to certain terms and conditions. Withdrawal rules are different for Extended PPF account. In the extension years of the PPF account, the account holder has the option to withdraw once in a financial year. However, the maximum amount you can withdraw depends on whether you have augmented the account with or without contribution.
If the PPF account is extended without any contribution, one can withdraw any amount to the extent of the balance available in the account. On the other hand, if the account is extended with fresh contributions, the amount of withdrawal during a block of five years cannot exceed 60 per cent of the balance available at the beginning of the extension period.
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