Investing in your child's name can help you save tax

Regular investment in the name of your children will help you to build a huge corpus build a large corpus for them in the long run. And a careful selection of the investment schemes will have the additional benefit of saving on taxes.

Children's contributions to the Public Provident Fund (PPF), the Sukanya Samriddhi Yojana (for girl children), life insurance plans, and certain mutual funds will help them build a large corpus in the long run.

You can put money into your minor child's name to help them achieve financial goals like education and marriage. The income from these investments is added to the income of the parent who earns a higher income, whether in the form of dividends, interest, or capital gains. This is referred to as income clubbing. Furthermore, this income is taxed according to the applicable income tax bracket for the parent.

Public Provident Fund (PPF)

You can open a PPF account in your child's name and contribute to it. Up to a limit of Rs. 1.5 lakh, this is eligible for a deduction under section 80C. The interest earned on a PPF investment is tax-free as well. PPF qualifies for the EEE income tax regime where, in addition to the Section 80C tax deduction, interest earned and maturity amount are tax-free. 

Sukanya Samriddhi Scheme

In the name of your minor girl child under the age of ten, you can open a Sukanya Samriddhi Scheme. It allows for a maximum investment of 1.5 lakh per financial year and is tax-deductible under Section 80C. Furthermore, both the interest and the maturity amounts are tax-free.

Equity Linked Saving Scheme (ELSS)

You can invest in ELSS in your child's name. ELSS are eligible for the Section 80C Income Tax Deduction up to a maximum of 1.5 lakh in a single year. Long-term capital gains from ELSS are exempt from tax up to a limit of Rs. 1 lakh.

Savings bank account

Any income earned from investments such as bank FDs or savings bank accounts, as well as other investments in your minor child's name, can be claimed for up to $1,500 per minor child (maximum 2 minor children).

Tuition fees

Tuition fees are eligible for tax exemption of up to ₹1.5 lakh under Section 80C.

Medical health insurance policy

The premium paid for the Medical health insurance policy taken for your child is allowed as a deduction u/s 80D