The good news is that the limit to invest in Public Provident Fund has been enhanced to Rs 1.5 lakh every year in this year's Union Budget.
Also, the amount of tax benefit under Sec80C that PPF gives has also been enhanced to Rs 1.5 lakh per year.
This makes investing in PPF a super opportunity, given that the income is also tax free in the hands of the investor.
How to invest?
A father and mother can invest in the name of two children, apart from themselves. Say, a father and mother have two children: A and B.
Then the father can invest for himself and A and B, while the wife can do the same. Or, the father can invest for A and Mother for B and vice versa.
It's important to remember that both the parents cannot open on behalf of the same minor child. So, the wife and husband cannot both open a PPF account for A.
The ceiling in the combined accounts has to be the threshold ceiling of Rs 1.5 lakh. This means that a child and one of the parents cannot invest more than Rs 1.5 lakh, while the wife and the other child can invest for another Rs 1.5 lakh, taking the total to Rs 3 lakh for the entire family.
It's important to note that the minor child's limit had to be clubbed with the parent.
When the child becomes a major
If the PPF matures (after 15 years) and the child becomes a major, it becomes the child's account, since he has attained a majority.
On the other hand, if he does not attain a majority, the guardian continues to remain the parents or those who are nominated.
There are no real benefits of opening a PPF account in the child's name since the limit is clubbed with the parent.
The PPF account may only help in the child's name when you want to build a corpus for education or other needs of the child.