I have two PPF accounts. What is the maximum tax benefit I can claim on both accounts?

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I have a PPF account for more than 14 years in SBI. Last year, I opened a PPF account (with HDFC Bank) in my 5-year-old son’s name and deposited Rs 1.5 lakh in the account besides the Rs 1.5 lakh I had already deposited in my own PPF account. I now believe a minor’s PPF account gets clubbed with the guardian’s. So what happens to the HDFC account? Can I withdraw the money and close the account? Will I get a tax benefit on this Rs 1.5 lakh or interest on the amount or both if I continue with the account?

Raj Khosla, Founder and Managing Director, MyMoneyMantra.com replies, “The ceiling for deposits to individual self account and minor account(s) to whom one is guardian, is currently capped at Rs 1.5 lakh in a financial year. Accordingly, interest earning and tax benefit is also available on Rs 1.5 lakh only. Any transaction over and above this amount should ideally be rejected by the bank. Contact HDFC Bank to get the transaction of additional Rs 1.5 lakh reversed to your account. The bank has no liability as you are supposed to declare previous PPF account(s) on the PPF form for opening the minor account(s). It is recommended to close this account. You could open a minor account in the next financial year and ensure a submission of minimum of Rs 500 and cumulatively maximum of Rs 1.5 lakh in both the accounts.”

I have been a regular investor through SIPs, PPF and life insurance since I started working in 2015. I used to invest enough take full advantage of Section 80C benefits. Now I am earning close to Rs 10 lakh per annum and my annual investments are Rs 1.2 lakh through SIPs, Rs 14,000 in life insurance and remaining amount for PPF (after including EPF). Where and how should I invest to grow wealth over the next 12-15 years?

Dev Ashish, Founder, StableInvestor and Sebi-registered investment advisor replies, “While most begin investing with a tax-saving agenda, one should eventually shift to a goal-oriented strategy and link all investments to different goals. Since you are young enough, you can have a moderately aggressive risk profile. Given your time horizon of 12-15 years, having an allocation of 60-70% in equity and 30-40% in debt can be considered. What you should do is to have two separate goal groups—retirement savings and other goals. The PPF + EPF and equity funds can form part of the retirement portfolio with 60:40 equity-debt allocation. So you can have SIPs in two large-cap index funds and one or two flexi-cap funds. If additional amount is to be invested in debt to ensure adherence to suggested allocation, then try to make extra VPF contributions (or PPF). For the other goals portfolio, keep the equity-debt allocation at 70:30 and invest in one flexicap fund and one ultra short debt fund (or a money market fund). Rebalance at least once a year after a few years of accumulation.”

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