How much can we invest in multiple PPF accounts?

Last Updated on September 8, 2024 at 10:53 pm

Update: The scenarios mentioned in this article are no longer applicable as per our understanding from 1st Oct 2024. For details see: New PPF rules apply only to irregular accounts! The maximum amount per pan number is 1.50 Lakhs, including the minor accounts from 1st Oct 2024. If you have 3 PPF accounts (self, spouse, and minor) and the deposits are more than 3 Lakhs per annum across all accounts. Minor accounts may be considered irregular in this case.

A person cannot have more than one PPF account, and the maximum amount that can be invested in a PPF account is Rs. 1.5 Lakh (as per current law). However, a family can have multiple PPF accounts: one for the father, one for the wife, one for each child, and so on. In this post, I discuss a question often asked in the Facebook group, Asan Ideas for Wealth. Full credit for this post goes to Ashal Jauhari, the admin/owner of the group.

Please note: this is a post discussing rules: how much can we invest in multiple PPF accounts and NOT a post about how much should we invest.  Therefore please treat this post as a discussion about rules and not investment advice. Asset allocation matters. Going overboard on any asset class is injurious to fiscal health.

Warning: There is a grey area in the argument given below. Who is the guardian of a child? Is it only the father or mother who is listed on the PPF minor account passbook? Or is it both parents as per laws of natural succession?

If it is only the father or mother then and only then the following argument will work. If it is both parents, the following argument will fail. There is no clear answer explicitly available to this question. Some people argue one parent and some argue that it is both parents, making it a grey area.

First things first:

1: An individual cannot have more than one PPF account in his name. He can have a second account as the legal guardian of a minor account. If he has ten children, he can have 10 such minor accounts + his own.

Now let us consider a family of four:

Raja, his wife Mala, and their two minor children, Pranav and Priya.

Raja has a PPF account in his name. If this is the only account the family has, the total investment per FY is capped at 1.5 Lakh.

Now Raja opens a PPF account for his son Pranav.  The total investment Raja can make in his account, plus his son’s account is Rs. 1.5 Lakh.

The rule on this is very clear in the PPF rule book (page 3) (this still has the old limit of Rs. 1L).

The limit of deposit of Rs. 1,50,000 in a year by an individual in his self account and accounts opened by him on behalf of his minor(s) of whom he is the guardian is combined under rule 3 (1) of the Scheme. This limit is separate for account opened by the HUF or an association of persons or body of individuals vide rule 3 (2) of the scheme.

Also,

A Public Provident Fund account on behalf on a minor can be opened by either father or mother. Both the parents cannot open a separate account for the same minor. An individual may open one PPF account on behalf of each minor of whom he is the guardian.

That is, Raja can open two minor accounts for their children or he can open a minor account for his son and Mala can open one minor account for their daughter.

Suppose the family has four PPF accounts.

Raja has his own + is the guardian for the minor son.

Mala has her own + is the guardian for the minor daughter.

Consider the following:

Raja invests Rs. 1.5L in his son’s account. This is the maximum he can invest in both his + his son’s account.

Mala invests Rs. 1.5L in her daughter’s account. This is the maximum she can invest in both her + her daughter’s account.

Now Raja is free to invest another Rs. 1.5L in Mala’s account. Similarly, Mala can invest Rs. 1.5L in Raja’s account. Of course, the maximum 80C that Raja or Mala can claim is only Rs. 1.5L.

This is illustrated below.

Now the family can invest Rs. 6L a financial year in the four PPF accounts.

This may seem like an overkill to you. Yes and no. For example, if the family can invest 15L per year (assuming they do not have any EPF or NPS), then this 6L investment is only 40%. The rest 60% can be invested in equity. So depending on the investible surplus, the financial goals, and desired asset allocation, multiple PPF accounts, and a corresponding investment makes sense.

Therefore,

do not be too eager to deal out death in judgement. For even the very wise cannot see all ends. ― J.R.R. Tolkien, The Fellowship of the Ring

If Raja and Mala had only 1 child, the max investment possible is Rs. 4.5 Lakh if both spouses earn and Rs. 3 Lakh if only one spouse earns.

A reminder that this post only discusses rules and does not recommend anything other than consider the warning mentioned above!