Kerala HC ruling on child PPF: Interest forfeited beyond ₹1.5 lakh cap

A Kerala High Court ruling on excess public provident fund (PPF) deposits has put a sharper edge on a rule that many parents misread. The court ordered the forfeiture of interest accrued on contributions a mother made to her children's PPF accounts after they turned 18, finding those deposits pushed her past the annual ₹1.5 lakh tax-free ceiling.

The case, reported by The Economic Times, involved a mother who opened PPF accounts for her children in 1999 and kept contributing until 2005 and 2007, after both children had attained majority. The court held that deposits made by a parent into a child's account after the child turns 18 count against the parent's own limit. Since the mother's contributions to her own account plus the two children's accounts exceeded the prescribed ceiling, the interest accrued on the excess amount, ₹6,87,021, was forfeited.

Tax experts told the paper the ruling is a warning. It validates forfeiture of interest from PPF accounts and defines the period of liability, making clear that the limit is not per account but per individual per financial year.

The underlying rule is straightforward. The total tax-free PPF contribution is ₹1.5 lakh per financial year, and that cap covers deposits made to an individual's own account and to a child's account combined. A minor's PPF account cannot receive more than ₹1.5 lakh in total contributions from both parents combined in a given tax year, regardless of who contributes. Each parent does not get a separate ₹1.5 lakh allowance for a child's account; the limit applies to the parent making the contribution.