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Thursday, August 8, 2013

Opening Multiple PPF Accounts in India

What is a Public Provident Fund (PPF) Account
PPF is a savings-cum-tax-saving instrument in India. It also serves as a retirement-planning tool for many of those who do not have any structured pension plan covering them. 

Why this post?
Off late, there have been lot of queries from my colleagues and multiple freedom seekers as regards to whether we can invest in PPF in the name of our family members over and above what we invest in our own account.
So, i thought of clarifying the same via this post.

Who all can open a PPF Account?
  • Individuals who are residents of India are eligible to open an account under the Public Provident Fund scheme.
  • A PPF account may be opened under the name of a minor by his/her legal guardian or in the name of the spouse. However, each person is eligible for only one account under his/her name.
  • Non-resident Indians (NRIs) are not eligible to open an account under the Public Provident Fund Scheme. 
  • However a resident who becomes an NRI during the 15 years' tenure prescribed under Public Provident Fund Scheme, may continue to subscribe to the fund until its maturity on a non-repatriation basis.
Multiple PPF Accounts - How much can i deposit?

Every person in a family can open a PPF account. 
However, below are the guiding rules when investing money in any of the PPF accounts:
  • If you open a PPF account in the name of your minor child (son or daughter) and you are the guardian for that account, then the total annual investment allowed in these two or three accounts put together is Rs. 1.5 Lacs. 
  • Interest will be credited to all the accounts (you and your child's) based on the savings done in each of those accounts. Since you are the guardian, you can claim a full tax deduction of Rs. 1.5 Lacs under Section 80C
  • Also, as per the rules of Clubbing of Income, the income generated by your minor child is taxed in your hands. Since PPF gain is tax free, you are not liable to pay any taxes.
  • If you open a PPF account in the name of your spouse or a child (above 18 years of age), then also you can deposit a total of Rs. 1.5 Lacs in each of the accounts and all such accounts would earn interest. Since you are not the guardian of an adult child's account or of your spouse's account, you will have no control over the money that exists in these accounts.

Remember that:
1) No individual can have two PPF accounts in their name at the same time. Doing so will invite a penalty. If the issuing authority (bank or post office) detects two accounts during the tenure of the scheme, you will get back only the principal you put into the account, sans any interest.
2) There have been reports from customers that they have opened multiple accounts and have also deposited up to a max limit of Rs. 1.5 Lacs in each account and are also earning interest. This is feasible, as long as the bank or post office is unable to detect this discrepancy. The moment the discrepancy is deducted, you are liable to return the additional interest along with penalty.

So, play as per the rules with your PPF investments, to avoid disappointment later.

Cheers


Manoj Arora
Lead a Financially Free Life !!

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