Children are the future of our country. But when it’s about their future, the onus is on the parents/guardians to make it safe and secure. A child might have many dreams and what better way to give wings to their dreams than saving for their future, right?
The best way to invest in your child’s future is by opening a minor Savings Bank Account in any bank across India. A minor Savings Bank Account allows you to save sums of money over the years for your child’s future. A minor Savings Account is quite similar to a regular savings bank account.
How does it work?
One can open a junior savings account for children below 18 years of age, where one can deposit and withdraw money just like a normal Savings Bank Account. The minor Savings Account is jointly held by the parent/guardian and the child. Once the child is 10 years old, they are allowed to operate the account on their own.
A child above 10 years of age is provided with a cheque book and a Debit Card to withdraw money. However, the parent/guardian can set a withdrawal limit. Once the child turns 18, one can either close the junior account or convert it to a regular Savings Account.
The rate of interest provided in the minor Savings Account and the minimum balance required for the account to remain active differ from bank to bank. The rate of interest offered by most banks ranges from 4-6%.
The interest earned on the amount saved in minor bank accounts is taxable. Usually, the interest from a junior account is clubbed with the parent/guardian’s income and is considered taxable. However, there is a tax exemption of Rs. 1,500 if the interest earned by the minor is more than Rs. 1,500. If the interest earned is less than Rs. 1,500, then a tax exemption equal to the amount of interest earned is granted.
Banks have the authority to freeze the minor Savings Account if the debit from the account exceeds the limit set initially.
How to open a minor savings account
Most banks follow the procedure given below to open a minor Savings Account
- An account opening form needs to be filled with the minor as the first holder and parent/guardian as the joint holder.
- Birth certificate of the child needs to be submitted to verify the age of the minor as well as his relationship with the parent/guardian.
- Pan Card details of the parent/guardian are required. Also, the parent/guardian should have an account in the bank where they wish to open the minor’s account.
- A separate form needs to be filled by the parent/guardian with all the necessary details.
- Address proof for the minor (such as the minor’s name which reflects on the ration card) is mandatory.
- The signature of the parent/guardian is also registered for all future account transactions.
- Photographs of the parent/guardian should be attached to the account opening form. Some banks even require the minor’s photograph.
So, make sure you have all the above mentioned documents in place when planning to open a minor Savings Account for your child.
Advantages of a minor Savings Account
- It helps cultivate the habit of saving in your kids at a young age.
- Be it college education or higher studies abroad – a minor Savings Account will help you save money for your child’s future.
- A child becomes aware of banks, Debit Cards, cheques and other financial terms which are the fundamentals of the financial system throughout the world.
Opening a minor Savings Account is the best thing you can do to secure your child’s future. Read more about the best minor Savings Accounts in the country.
What are the RBI rules regarding closure/premature closure of minor accounts?
Hi K Manikanandan,
RBI has rules for opening a bank account for minors. Check this link – https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8866&Mode=0. However, we don’t think there are rules for closure. Please check with your bank.