As a parent / guardian, it is one of your essential duties to secure the future of your child. Go ahead; give wings to her dreams by initiating smart saving processes via a minor Savings Bank Account.
Designed on the same lines as a regular account, a Savings Bank Account for minors is what you may like to open on a double for securing your child’s future. With easy-to-use features, assured returns, and high liquidity of the deposited amount, this type of account can be opened for all kids aged below 18 years. Here’s a quick look at how you can use a junior savings account for depositing/ withdrawing your child’s savings – just the way you would do in any other normal savings account.
The Age Factor
Once your kid is 10 years old, she will be allowed to use and operate her account all by herself! Now, is that not something that you would like her to be proud of? Alongside, she will get her own debit card and cheque book for withdrawing money. It is well-advised that you set up a withdrawal limit to prevent any erroneous or unauthorized usage of the account. When your child becomes 18, you may want to convert the junior account into a regular savings account, or continue with the same.
Interest on Deposits
In India, minor savings bank which can be opened online or through a branch, provide varying rate of interests on deposits. Also, the minimum balance required for keeping the account active tends to differ from one bank to the other. In general, the rate of interest on offer by most banks would be in the range of 4-6%.
Is the Interest so Earned Taxable?
Yes, interest generated on the deposited amount is taxable after being clubbed with the income of the parent/guardian. However, you will be allowed an exemption on the clubbed income to an extent of Rs. 1,500/- per child In other words, if the interest earned from such savings account deposits is less than Rs. 1,500, then, you will gain a tax exemption that is equivalent to the total earned interest.
Freezing of Minor Savings Account
Still worrying about your little one withdrawing more money than the limit set initially by you? Fret not. In case such a situation arises, the bank will freeze her account right away!
Opening a Minor Savings Account is Easy
Once you have taken the decision of applying for a minor Savings Account, you need to go through the following steps:
- Fill up an account opening form, with you being the joint account holder and your kid the primary holder.
- Submit your child’s birth certificate to establish her relation with you and aid the process of age verification as well.
- As a parent/guardian, your PAN card details have to be submitted with the bank authorities; also, it is essential for you to possess an account at the same branch where you intend to open the minor account.
- To complete the account opening procedure, you will have to fill up another form with all the necessary details.
- It is mandatory to supply the minor’s address proof as well.
- Your signature shall be registered for authenticating future account transactions.
- While some banks may also require your child’s photograph, it is essential to attach your photographs on the account opening form.
So, before proceeding to open a minor Savings Account, do ensure that you have all the required documents in place.
Benefits of Minor Savings Account
- This type of account cultivates the good habit of saving in kids.
- Be it for marriage, higher studies abroad, or your child’s college education, you can start saving money without any ado.
- By operating this account, children become familiar with banks, debit cards, and several other financial terms at a very early age.
Would you like to read more about such junior savings accounts operating in the country? We shall be happy to address your queries pertaining to the opening of a minor Savings Account. Just leave your comments here and we will get back to you!