Funding a Spouse's PPF: Section 80C Rules on Deduction, Ownership

Contributing to a spouse's Public Provident Fund account can lower your tax bill under Section 80C. The rules on whose money qualifies and who owns the corpus are where taxpayers get tripped up.

An individual can claim a deduction under Section 80C for contributions made to a spouse's PPF account, subject to the overall annual limit of ₹1.5 lakh. The critical condition: the contribution must come from the taxpayer's own funds. Maintaining an audit trail through banking statements and deposit receipts is essential.

Tax and investments expert Nishant Shanker of Navraj Global Advisors said investing in a PPF account held in your wife's name can be an effective long-term savings and tax planning strategy. "Where the contribution is made from your own funds, you may claim a deduction under Section 80C (subject to the overall annual limit and the applicable tax regime). It is important to retain adequate documentation, such as bank statements and PPF deposit receipts, to substantiate that the contribution was made by you," he said.

The annual contribution to a PPF account cannot exceed ₹1.5 lakh in a financial year. Any excess contribution does not earn interest, Shanker added.

Ownership stays with the spouse. "While you may fund the account, the investment legally belongs to your wife. She retains all rights over the account, including withdrawals, loans (subject to the PPF Scheme), nomination, and receipt of the maturity proceeds," he said.

From a tax perspective, the interest accrued and the maturity proceeds of the PPF account remain exempt from tax. "The clubbing provisions generally do not have any practical impact on the tax-free PPF interest," Shanker said.