If you want to get the maximum possible interest for the year in your Public Provident Fund (PPF) account, April is a crucial month. If you invest ₹1.5 lakh in PPF from 1-5 April, you are entitled to the full year’s interest, as the per-month interest is calculated on the lowest balance in the first five days of the month, and April marks the start of the financial year.
However, you can invest a maximum of ₹1.5 lakh in PPF in a financial year. There’s a workaround, though. If you wish maximise your PPF investment, you can do so by gifting money to your spouse, children or parents, and investing it in PPF accounts you created for them.
Also read: How to withdraw funds from PPF or even close the account prematurely
“It’s possible to gift money to immediate relatives and invest in PPF through their account,” said Bangalore-based CA Prakash Hegde. “Since interest from PPF is exempt from tax, clubbing will not have any impact.”
He added, however, that if you contribute to your spouse’s PPF account and they buy an income-generating asset on a future date, the proceeds from those assets will be clubbed with you for taxation.
Remember – one account per head
A government order in 2024 said if an individual had more than one PPF account, all but one would be considered valid. The others would be tagged as irregular accounts, and interest on those would be revoked retrospectively. If you have two accounts, you have to tag one as the primary account, and the balance in the second account will be transferred to it. From third account onwards, you won’t earn any interest from the date of opening.
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To be sure, minors or those under 18 can open a PPF account and get prevailing scheme rates. However, the guardian opening the account cannot contribute more than ₹1.5 lakh in total between them and the minor.
Hedge said a guardian can open only one account for a particular minor. If both mother and father open an account for a minor, one of them will be deemed ‘irregular’. The guardian must designate one account as primary, and any additional accounts will be deemed irregular.
Also it’s not possible to prematurely close a minor’s account, so any irregular accounts will earn the Post Office Savings Account (POSA) interest rate until the minor turns 18. After that, the secondary account will be merged with the primary one.
Also read: Plan to withdraw from EPF for marriage, education, or illness? Know the rules
