Mother continued PPF deposits after children turned 18; Kerala High Court orders her to pay back extra interest

On March 22, 1999, a mother opened three public provident fund (PPF) accounts at the post office; one in her name and two for her first and second child. She regularly deposited money in all three PPF accounts. The first child turned 18 on December 24, 2005 and the second child on September 26, 2007. After that, even though both kids were now adults, she didn’t withdraw any money from the PPF Accounts and kept making deposits whenever she could.

It wasn’t until 2017 that the Post Office sent a letter dated September 29, 2017, to the mother, informing her that the total amounts in the three PPF accounts, taken together, would surpass the limit set by the Public Provident Fund Scheme 1968, since the children were minors when the accounts were opened. On this ground, the Post Office took back (forfeited) Rs 6,87,021 in accrued interest from the three PPF Accounts combined.

Aggrieved with the appropriation, the mother filed a Writ Petition in the Kerala High Court seeking relief. A Single bench Judge allowed the Writ Petition. However, the Post Office then appealed to a Kerala High Court double bench.

What did the Kerala High Court say?

On August 14, 2025 the Kerala High Court analysed the judgement of the single bench judge and also the Public Provident Fund Act 1968.

The Kerala High Court said that it is an admitted position that the mother opened three PPF Accounts, one in her name and the other two in the names of the first and the second children, respectively, on March 22, 1999.

Rule 3 of Public Provident Fund Act 1968, provides the limit of deposit of Rs 1 lakh in a year by an individual in his/her self-account and accounts opened by him/her on behalf of minor(s) of whom he/she is the guardian, is combined under Rule 3(1) of the Scheme. The limit has been enhanced from time to time.

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The Kerala High Court said that thus, as per Rule 3, the excess deposits made into these minor accounts, during the period till the minors attained the age of majority, will be taken as the deposits made by the mother, which violates the limit prescribed under Rule 3 of the Public Provident Fund Act 1968.

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The Provident Fund law says this

The Kerala High Court reproduced the relevant sections of the Provident Fund Act, 1968 and said:

Rule 3 of Scheme 1968 and its Clarification are reproduced below:

• "3. Limit of subscription:- (1) Any individual may, on his own behalf or on behalf of a minor of whom he is the guardian, subscribe to the Public Provident Fund (thereafter referred to as the fund) any amount not less than Rs 500 and not more than Rs 1,50,000 in a year.”

Clarifications:

• “(3) The limit of deposit of 1,00,000 in a year by an individual in his selfaccount and accounts opened by him on behalf of his minor(s) of whom he is the guardian is combined under rule 3 (1) of the Scheme. This limit is separate for accounts opened by the HUF or an association of persons or body of individuals vide rule 3 (2) of the scheme.”

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Sections 3 and 4 of the Public Provident Fund Act 1968 read as follows:

"Section 3: Public Provident Fund Scheme.-

1. The Central Government may, by notification in the Official Gazette, frame a scheme to be called the Public Provident Fund Scheme for the establishment of a provident fund for the general public and there shall be established, as soon as may be after the framing of the Scheme, a Fund in accordance with the provisions of this Act and the Scheme.
2. Subject to the provisions of this Act, the Scheme may provide for all or any of the matters specified in the Schedule.
3. The Scheme shall have effect notwithstanding anything contained in any law for the time being in force other than this Act or in any instrument having effect by virtue of any law other than this Act.
4. The Central Government may, from time to time, by notification in the Official Gazette, add to, amend or vary the Scheme.

Section 4: Subscriptions to Fund.- Any individual may, on his own behalf or on behalf of a minor, of whom he is the guardian, subscribe to the Fund in such manner and subject to such maximum and minimum limits as may be specified in the Scheme."

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Kerala High Court analyses the total interest accrued in the minor’s PPF a/cs

The Kerala High Court analysed the account statements and said that it can be seen that the total interest accrued in the minor accounts till the respective dates, i.e., till the date of attaining majority, is the only amount that is forfeited, viz. Rs 6,87,021.

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Thereafter, the accounts continued to be operated, and contributions were made for which interest had already been paid regularly to the respondents by the appellants. The appellants have no objection to the interest paid after attaining the age of majority, and there is no dispute.

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The period for which interest is forfeited, in respect of the first child, is with effect from March 20, 2002 to March 16, 2005, whereas in respect of the second child, it is with effect from March 20, 2002 to March 24, 2007.

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Kerala High Court says: If the mother operates the account of minor children and deposits the amount, the amount deposited in all three accounts taken together will be clubbed

The Kerala High Court said that as per Scheme 1968, if the mother operates the account of minor children and deposits the amount, the amount deposited in all three accounts taken together will be clubbed for the limit prescribed under the Scheme from time to time.

From the charts (showed below), it can be seen that every year, certain limits have been crossed. However, the said discrepancy could not be noticed by the appellants (Post Office) herein till it was pointed out in the internal audit in the year 2017. Such payment of excess interest would amount to unjust enrichment, and the same would be a burden on the public exchequer.

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Kerala High Court final judgement

The Kerala High Court said:

• The learned Single Judge has not considered the facts that the appellants have appropriated the interest amount only for the period till the first and the second respondents attained majority as per the Act as well as the Rules; the amount deposited is to be clubbed together; and the excess contribution cannot be deposited beyond the prescribed limits.
• Hence, the appellants (Post Office) have rightly appropriated the amount of Rs 6,87,021 from the accounts concerned. The learned Single Judge failed to consider these aspects and allowed the writ petition. Accordingly, the judgment passed by the learned Single Judge cannot be countenanced.
• As a result, the judgment dated 05.09.2024 in W.P.(C) No. 23639/2017 is hereby set aside. The appellants (Post Office) herein are free to recover the excess amount of interest paid, i.e., Rs. 6,87,021/-, from the accounts of the respondents if not already recovered or appropriated. Writ Appeal is allowed. No order as to costs.

Gyanendra Mishra, Partner, Dentons Link Legal said to ET Wealth Online:
The judgment from the Kerala High Court holds significant implications for Public Provident Fund (PPF) accounts, particularly those opened by a guardian in the name of a minor child. The core significance of this ruling is that it unequivocally clarifies and upholds the rule of clubbing deposits. Here’s a breakdown of what that means for investors:

• Reinforces Statutory Deposit Limits: The judgment establishes that deposits made by a guardian into a minor's PPF account are not treated in isolation. Instead, they must be combined (or "clubbed") with the deposits made into the guardian's own PPF account. The total combined amount for any financial year cannot exceed the statutory limit prescribed under the PPF Scheme, 1968.
• Validates Forfeiture of Excess Interest: The court ruled that postal authorities are legally entitled to forfeit the interest accrued only on the deposits that exceed the annual limit. This action is not arbitrary but is a lawful application of the PPF scheme's rules to prevent individuals from gaining an unfair advantage at the expense of the public exchequer. In this specific case, an amount of ₹6,87,021 in accrued interest was appropriated by the authorities.
• Defines the Period of Liability: A crucial aspect of the judgment is its precision regarding when the clubbing rule applies. The court specified that the forfeiture of interest is only for the excess deposits made during the period when the account holder was a minor. The authorities did not interfere with deposits or interest credited after the children attained the age of majority, at which point their accounts are treated independently.
• Acts as a Precedent and Warning: This ruling sets a clear precedent, overriding a previous Single Judge's decision that had favored the investor. It serves as a significant warning to all guardians with PPF accounts for their minor children to be vigilant about their total annual contributions across all linked accounts to avoid future penalties and forfeiture of interest.

Mishra says: "In summary, the judgment's primary significance is that it removes any ambiguity regarding the treatment of a minor's PPF account. It confirms that such an account is considered an extension of the guardian's account for the purpose of the annual deposit limit, and any violation can lead to a lawful forfeiture of the interest earned on excess contributions."

Shreni Shetty, partner ANB Legal, said to ET Wealth Online: What happened in this case is that a parent had opened a Public Provident Fund (PPF) accounts for herself and for her two children when they were minors. The parent’s account was a regular one whereas the other two were guardian accounts which were managed by the parent itself. Over the years, the parent deposited more than the allowed amount across all three accounts. The children became adults, but the deposits continued without their accounts being converted to regular. Eventually, the Post Office took back around Rs. 6.87 lakh in interest, saying the rules regarding maximum deposits in a given year had been broken.

You Need to Know:

• Firstly, there’s a strict yearly limit on how much a parent (or guardian) can deposit across their own PPF account and those opened for their minor children. And secondly, if you go over this limit (even by mistake) the government can refuse to pay interest on the extra amount.
• What parents/guardians should do: a) Keep track of total deposits across all accounts. b) Once your child turns 18, convert the account to their name and stop managing it as a guardian. c) Don’t assume that multiple accounts mean multiple limits. The cap is shared, not separate.
• The bottom line is that PPF has specific rules, and this case is a reminder that even small mistakes can lead to financial loss. Like with any investment, proper research and understanding before you start is essential.

Minor attained majority on December 24, 2005:

Minor attained majority on September 26, 2007: