Can mother and father both contribute in PPF account of their minor daughter opened and operated by the minor's father. If yes, how the entries for contribution and interest be made in the books of father and mother. No need to claim deduction under section 80c by either parent.
Reply by Balwant Jain, an investment and tax consultant
As per paragraph 3 of the Public Provident Fund scheme, 2019 a parent can open a Public Provident Fund (PPF) account in the name of a minor. Please note not more than one account can be opened in the name of a person. Under the PPF scheme, 2019 there is no restriction on any of the parent or both the parents contributing to the PPF account of a minor child.
As per paragraph 4 of the scheme an individual can contribute not more than Rs 1.5 lakh to his PPF account as well as to the PPF accounts of the minor/s taken together. So while contributing to your own account, you can also contribute to the PPF account of your daughter but aggregate of the deposits by each one of you should not exceed the threshold of Rs 1.5 lakh for contribution made to your own account as well as to the PPF account of your minor daughter. So contribution to the PPF account of your one daughter made by you and your wife both together cannot exceed the threshold limit of Rs 1.50 lakh in a year.
The limit of Rs 1.50 lakh is applicable whether you wish to claim the tax benefit under Section 80C or not for contribution made to the PPF account of your daughter.
As far as the entries for contribution and interest in your books of accounts are concerned, the contribution can be shown as gift made by you to your daughter in the books of the parents and the daughter. The entries in respect of interest credited to the PPF account of your daughter will be made in her books and it will not at all reflect in the books of the contributing parents.
Please note that due to clubbing provisions income of a minor is required to be added to the income of parent with higher income. So either you or your wife will have to include all the incomes accruing to your daughter (Including the PPF interest for the year) in excess of one thousand five hundred rupees in a year. Since interest on PPF account is tax free the same can be disclosed in the EI schedule of the ITR.
(Views expressed are those of the expert's own)