Benefits of Opening a PPF Account for Children

Securing a child’s future is a top priority for parents, and one effective way to do so is by opening a Public Provident Fund (PPF) account. This government-backed savings scheme offers attractive returns and various benefits that contribute to long-term financial well-being.
Tax advantages
Parents can enjoy significant tax benefits by opening a PPF account for their children. Contributions made to the account are eligible for tax deductions under Section 80C of the Income Tax Act, up to a maximum limit of Rs. 1.5 lakh per financial year. Additionally, the interest earned and maturity proceeds are tax-free, making it a tax-efficient avenue for wealth creation.
Long-term planning
The PPF account provides an advantage with its 15-year lock-in period, enabling parents to engage in long-term financial planning for their children. Once the child turns 18, they have the flexibility to choose whether to close the account or extend its tenure. While the extended lock-in period of 15 years poses liquidity challenges, the PPF is widely recognized as a reliable investment option.
Partial withdrawal facility
PPF account holders have the option to make partial withdrawals from their accounts starting from the 7th year, subject to specific terms and conditions. During the extension period, account holders can make one withdrawal per financial year. The withdrawal amount depends on whether the account is extended with or without fresh contributions. This flexibility allows parents to withdraw funds for short-term financial needs while maximizing the growth potential of the PPF account.
Currently, the PPF account offers an interest rate of 7.1%. Opening a PPF account for children offers tax advantages, long-term planning opportunities, partial withdrawal flexibility, and attractive interest rates. It serves as a valuable tool for parents to build a strong financial foundation and secure their children’s future.
Re-reported from the article originally published in OneIndia.