Kerala Woman Loses Lakhs in PPF Interest Due to Minor Over-Deposit, Court Upholds Post Office Decision

Investing in a Public Provident Fund (PPF) is considered safe and tax-efficient, but strict rules mean even small errors can lead to substantial losses. A recent case in the Kerala High Court highlighted this, where a woman lost approximately ₹6.87 lakh in interest for exceeding the annual PPF deposit limit.

What happened?
In 1999, a Kerala resident opened three PPF accounts—one in her name and two in her minor children’s names. She continued depositing regularly into all three accounts. Her children turned 18 in 2005 and 2007, but she neither closed nor transferred their accounts and kept depositing as before.

Post office action
In 2017, the post office informed her that the total deposits across all three accounts exceeded the annual PPF limit (₹1 lakh at the time, later increased to ₹1.5 lakh). Consequently, the post office forfeited ₹6.87 lakh in interest, citing a violation of the scheme’s rules.

Court ruling
A division bench of the Kerala High Court upheld the post office’s action. The court clarified that deposits made in minor children’s PPF accounts are considered part of the guardian’s deposits. If the combined total exceeds the annual limit, interest on the excess amount cannot be paid. The court ruled the forfeiture of interest as legitimate and lawful.

Key takeaway
PPF accounts opened for minors fall under the guardian’s annual deposit limit. Exceeding this limit, even inadvertently, can result in loss of interest, emphasizing the importance of careful compliance with PPF rules.