Want to invest for the wellbeing of your child in the future? You should start as early as possible. Here are some of the options that you can choose in this regard:
- PPF (Public Provident Fund) – PPF accounts can be invested in by guardians and a single account will be available for one child. The maximum investment to be made here is Rs. 1.5 lakh in a particular financial year. This investment qualifies for deductions under Section 80C up to Rs. 1.5 lakh from the total income. In case there is more than one PPF account held by the parent in the child’s name and his/her own name, the maximum contributions in both these accounts will be eligible for tax deductions up to Rs. 1.5 lakh under Section 80C. The interest from PPF is free from taxes.
- FD/Savings Accounts- Parents can make investments in savings bank accounts and fixed deposit accounts in the names of their children. In both cases, the interest that is earned will be combined in the hands of the parents and taxed accordingly. Exemptions of Rs. 1, 500 can be claimed by parents of minor children under Section 10 (32). In case there is an investment in a tax-saving fixed deposit, deductions can be claimed on the same up to Rs. 1.5 lakh under Section 80C.
- Insurance- There are various child plans that are available for ensuring adequate financial support for children in their future. These plans usually insure the parents who have minor children. Tax benefits are available on the policy premium under Section 80C and claims received as per Section 10 (10D).
- SSYA- The Sukanya Samriddhi Yojana Account can be set up by parents of female children with authorized bank branches or at their nearest post offices. The minimum contribution is Rs. 1, 000 and the maximum is Rs. 1.5 lakh which can be invested for 15 years from opening this account. Deductions are allowed up to Rs. 1.5 lakh under Section 80C while the maturity amount and interest are also tax-free.