Why Every Parent Must Consider Opening A PPF Account For Their Child

Sanskrit56

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posted on 1 year ago — updated on 1 second ago

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Here are a few reasons how a PPF account will benefit your child’s long-term financial well-being

Parents want to secure their child’s futures, offering them some financial stability whenever needit at crucial junctures of their lives. Opening a Public Provident Fund (PPF) account could be one important step to providing children with a solid financial foundation for the future. PPF is a government-backed savings plan that offers good return rates and a slew of other advantages. Backed by the government, PPFs are risk-free and guarantee stable returns.

Here are a few reasons how a PPF account will benefit your child’s long-term financial well-being:

-Lock-in period:

PPF account has a 15-year lock-in period. When the child reaches the age of 18, he or she can choose whether to close or extend the account.So, if you open a PPF account for your child at a young age, they can avoid the fix of lock-in period in period and have greater flexibility to withdraw funds.

-Tax benefits:

Every person can open a PPF account at their nearest bank or post office. An account holder is permitted to deposit or invest a total of Rs 1.5 lakh in a single fiscal year, which is also eligible for applicable tax benefits at the time of filing the return. Contributions to PPF are eligible for tax deduction under Section 80C of the Income Tax Act. The interest earned and the maturity proceeds are further tax-free.

-PPF interest rate:

PPFs are one type of investment vehicle that comes within the Exempt-Exempt-Exempt (EEE) category. A risk-free investment option, PPF offers a guaranteed return. At present, investment in the PPF account is eligible for a 7.1 per cent interest rate.

-Compounding:

The Public Provident Fund, backed by the government, is the best option if you are looking to invest in a low-risk financial vehicle. Since there is a long lock-in period, your original investment plus the return earned compound to offer you greater proceeds.

– Partial Withdrawal:

Account holders are entitled to withdraw funds from their PPF accounts starting from the seventh year, subject to certain terms and circumstances, as per PPF guidelines. The withdrawal rules for an extended PPF account, on the other hand, may differ.