Public Provident Fund: Can both parents invest ₹3 lakh in a child's account without tax benefit?

No. Both parents cannot invest ₹3 lakh in their minor child's PPF account. While both can contribute to their child's PPF account, the total contributions, including the contribution to their personal PPF accounts, should not be more than ₹1.5 lakh in a year. Today's Q&A answers this issue in detail in response to a reader's query.

Parents are allowed to open a Public Provident Fund (PPF) account for their minor children. But they cannot open more than one account in the name of one child.

The PPF scheme rules do not restrict any of the parents, or both parents, from depositing money in the PPF account of their minor child.

An individual is allowed to contribute only up to ₹1.50 lakh in a year to his/her own PPF account as well as to the PPF account of all his/her minor children taken together.

So while contributing to your own PPF account, you can also contribute to the PPF account of your minor daughter. But the sum of the money deposited by each one of you to your own account, as well as to the PPF account of your minor daughter, should not exceed the limit of ₹1.50 lakh in a year.

Moreover, the sum of all deposits, which can be made in a single PPF account, cannot be more than ₹1.50 lakh in a year.

So the total contribution to the PPF account of a minor child by both parents cannot exceed the threshold limit of ₹1.50 lakh. This limit applies irrespective of whether or not you want to claim the tax deduction benefit under Section 80C.

As far as book entries for contributions and interest in the PPF account of your minor daughter are concerned, the contributions can be shown as a gift to the minor daughter in the books of the respective parents. The entries in respect of interest credited to your daughter's PPF account should be made in her books of account. It should reflect in the books of the contributing parents.

Due to clubbing provisions, the income of a minor is required to be clubbed with the income of one of the parents with higher income. So either you or your wife, depending on whose income is higher, will have to include all the incomes accruing to your minor daughter (including the PPF interest for the year) in excess of ₹1500 in a year to your income. Since interest on the PPF account is tax-free without any limit, it will not have any tax implications. The same can also be disclosed in the Exempt Income schedule of ITR.