Is curiosity on minor’s PPF account taxable?

I’m working with a multi-national firm (MNC) and my Public Provident Fund (PPF) contribution is round ₹5 lakh. Can I open separate PPF accounts for my two minor youngsters? Will the curiosity on these PPF accounts be clubbed with my revenue and is it taxable? Also, my spouse is a health care provider and contributes ₹1.5 lakh in direction of her PPF account. How can we handle investments in PPF ?

— Name withheld on request

We  presume that you’re at the moment contributing roughly ₹5 lakh every year as worker contribution in direction of Employee Provident Fund (EPF) account, and to not the PPF account (as talked about in your question) by the use of deduction out of your wage. 

Thus, the utmost threshold restrict (at the moment ₹1.50 lakh) of deduction below part 80C of the Income-tax (I-T) Act, 1961, is already exhausted, therefore, no additional tax deduction can be out there for a contribution in direction of PPF. 

Additionally, revenue earned on the worker contribution to EPF in extra of ₹2.50 lakh (i.e., contribution of ₹5 lakh minus ₹2.50 lakh) shall even be taxable in your arms as per guidelines for taxation relevant to revenue from different sources.

Please observe that as per the Public Provident Fund Scheme, 2019, a person could open PPF accounts of their identify, in addition to within the identify of every minor baby. Thus, you might open the PPF accounts for each your minor youngsters.  As per the scheme, PPF deposit by a person is capped at ₹1.50 lakh every year. Contributions made in minor’s account are additionally clubbed within the stated restrict. Hence, whole contribution in all three PPF accounts (i.e., your and two minor accounts) shall be capped at general restrict of ₹1.50 lakh. The revenue earned from funding within the PPF account is exempt within the arms of the person. 

Also, you will need to observe that revenue earned by a minor baby from the PPF account (besides in case of a minor baby affected by a specified incapacity) can be clubbed and provided to tax within the arms of the father or mother whose revenue is larger.  As per provisions of part 10(11) of the I-T Act, curiosity accrued in PPF account the place annual contribution doesn’t exceed ₹5 lakh shall not be taxable. Accordingly, curiosity accrued for the annual contributions (as much as ₹1.50 lakh) shall be exempt in your arms (together with curiosity on minor PPF accounts which is clubbed in your arms, assuming you’re the higher-earning partner). You might want to appropriately disclose all the PPF curiosity as exempt revenue in your private tax return.

Further, your spouse, being a separate taxpayer, could proceed to deposit ₹1.50 lakh in her PPF account from her private revenue. Interest revenue accrued from her deposits shall be required to be reported in her private tax return appropriately as exempt revenue.

Parizad Sirwalla is partnerand head, world mobility providers, tax, KPMG in India.

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