While planning for tax-saving investments, individuals must look at various ways of investing in their children’s name to save tax. Investments in the name of children in tax-saving instruments such as Public Provident Fund (PPF), Sukanya Samriddhi (for girl child), traditional insurance plans and certain mutual funds will not only help you to reduce your tax liabilities but will also help in building a large corpus for them in the long-run.
Invest in PPF, Sukanya Samriddhi
For all risk-averse investors, investing in PPF can help build a corpus for children, especially for their higher education and marriage. You can invest up to Rs 1.5 lakh in PPF in a financial year. The current rate of interest is 7.1%. A parent can open a PPF account for his minor children. The account will be under the guardianship of the parent till the child is 18 years old. However, if the parent has an existing PPF account in his name, then the investment in both the accounts (parent and child) cannot exceed the overall limit of Rs 1.5 lakh in a financial year.
Either of the parents can open a PPF account on behalf of the minor and avail tax exemption under Section 80C of the Income Tax Act. The documents required are a passport-size photograph, proof of age of the child and PAN of the guardian. Once the child completes 18 years of age, the name of the guardian will be removed and the adult child can continue investing in the fund by renewing it every five years after the 15-year maturity.
A parent can open a Sukanya Samriddhi account in the name of the girl child and invest up to Rs 1.5 lakh in a financial year and claim tax deduction under Section 80C. The interest rate is 7.6% and the account can be opened up to the age of 10 years only from the date of birth of the child. Money can be withdrawn from the account after the child attains the age of 18 or passes 10th standard. The account will close after 21 years from the date of opening or at the time of marriage of the child after attaining age of 18years…
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