Opened PPF account for your son or daughter? What parents can and cannot do with the money

A recent Delhi High Court ruling has put the spotlight on an important question for parents who invest in their children’s name: Can a parent withdraw or use that money for purposes other than the child’s needs?

He later argued that the amount should be adjusted against maintenance paid to his daughter and wife.

The Delhi High Court rejected the argument and upheld the decree directing him to return the entire PPF corpus, along with 8% annual interest.

So, what can parents do with investments held in a child’s name, and where are the limits?

In a conversation with Upstox News, Anshuman Jagtap, Partner at Economic Laws Practice, explained what a parent can and cannot do with a minor’s assets.

What a parent can do

A parent, as guardian, may open, run, and close a minor's investment account or scheme strictly in accordance with the rules governing that instrument (e.g., closing a PPF account on maturity is not, by itself, improper).”

Withdrawals are permissible where the money is used for the child’s education, medical treatment, or similar upbringing expenses consistent with any undertaking given to the institution.

A parent must keep discharging maintenance towards the child, and towards a spouse where so ordered as an independent obligation, funded from the parent’s own resources, not from the child’s account.

On the child turning 18, the guardian's role ends; the parent is expected to hand over control of the account, together with its full accrued value, to the child.

Where an instrument, scheme rule, or statute requires prior sanction before an act (e.g., alienating a minor's immovable property, or withdrawing beyond permitted limits), the parent may proceed after obtaining that permission.”

What a parent cannot do

Once withdrawn, the money cannot be transferred to the parent’s own account, spent on the parent’s needs, or otherwise treated as the parent’s property it remains the child’s, held only in trust.

Maintenance already paid to the child or to a spouse cannot be set off against the child’s investment corpus. The two are independent legal obligations; one cannot substitute for the other.

A provision such as Section 10 of the PPF Act only protects the mechanics of closing an account in good faith; it does not excuse the parent from separately accounting to the child for the money withdrawn.

A parent cannot sell, gift, mortgage, or lease a minor's immovable property beyond 5 years without prior permission of the court, regardless of how the transaction is justified.

Mixing a minor’s investment proceeds with the parent’s own bank accounts or business funds, even temporarily, undermines the fiduciary character of the holding and invites a presumption of misuse.”

Where both parents are guardians, or where the scheme/court requires joint consent, one parent cannot operate on, withdraw from, or close the account without the other’s concurrence.

Once a specific undertaking has been given to a bank or institution on how the withdrawn funds will be used, the parent cannot depart from that undertaking and apply the money elsewhere.

Does this apply to SSY, NPS Vatsalya and other investments?

The Delhi High Court case concerned a PPF account. However, the underlying principle that a guardian holds a minor’s investment for the child’s benefit can have relevance to other assets as well.

The precise rules, however, can differ from one investment to another. Parents should therefore check the applicable scheme rules before making a withdrawal or transferring funds.

What about movable and immovable property?

Jagtap also pointed to the separate legal restrictions governing a minor’s property:

“Under Section 6 of the Hindu Minority and Guardianship Act, 1956 (or the Guardians and Wards Act, 1890, for non-Hindus), a natural guardian may acquire, register, and administer property in a minor’s name, but cannot sell, gift, mortgage, or lease it for more than 5 years without prior court permission, a statutory restriction independent of, and stricter than, the fiduciary-duty principle laid down in this case.”

The Delhi High Court ruling is a reminder that being the guardian of a child’s investment does not make the parent the owner of the money.

A parent can operate an account for a minor within the applicable rules. But the child’s corpus cannot simply be treated as the parent’s personal money or used to discharge a separate obligation such as maintenance.