Public Provident Fund or PPF is a popular savings scheme with the sovereign guarantee and decent rate of returns adding to its charm. But there is a cap to the annual investment in the scheme – if you end up earning interest on any extra contribution made over and above this limit, then you will have to return that amount. Here’s a Kerala High Court judgment to better understand this:On 22 March 1999, three public provident fund accounts were opened by a mother at the post office, including one for herself and two for her children. She consistently made deposits into all three PPF accounts. The first child attained majority on 24 December 2005, whilst the second child turned 18 on 26 September 2007. Despite her children becoming adults, she continued making deposits into the PPF accounts as and when possible.According to an ET report, in 2017, the Post Office dispatched a letter dated 29 September 2017, notifying the mother that the aggregate amount in the three PPF accounts exceeded the prescribed limit under the Public Provident Fund Scheme 1968, as the accounts were opened when the children were minors. Consequently, the Post Office recovered Rs 6,87,021 in accumulated interest from all three PPF accounts.Dissatisfied with this action, the mother initiated a Writ Petition before the Kerala High Court. Whilst a Single bench Judge ruled in favour of the petition, the Post Office subsequently challenged this decision before a division bench of the Kerala High Court.
PPF case: What were the Kerala High Court’s observations?
On August 14, 2025, the Kerala High Court scrutinised both the single bench judge’s ruling and the Public Provident Fund Act 1968, the ET report said.The court noted that the mother had opened three PPF Accounts on March 22, 1999, including one for herself and two separate accounts for her first and second children.According to Rule 3 of Public Provident Fund Act 1968, there exists a yearly deposit ceiling of Rs 1 lakh for an individual, which includes both their personal account and accounts opened for minors under their guardianship, as stipulated in Rule 3(1) of the Scheme. This limit has seen periodic increases.The court concluded that under Rule 3, any deposits exceeding the limit made into these minor accounts before they reached adulthood would be considered as the mother’s deposits, thereby violating the prescribed limit under Rule 3 of the Public Provident Fund Act 1968.
What is the Public Provident Fund Law?
The High Court of Kerala presented specific portions of the Provident Fund Act, 1968, highlighting the following:Rule 3 from Scheme 1968, along with its associated clarification, states:– “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.”– “(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.”The Public Provident Fund Act 1968 contains Sections 3 and 4, which outline key provisions.Section 3 empowers the Central Government to establish and implement the Public Provident Fund Scheme through Official Gazette notification. It authorises the creation of a provident fund accessible to the general public. The section stipulates that the Scheme can encompass matters detailed in the Schedule whilst overriding other existing laws except this Act. Additionally, the Central Government retains authority to modify, supplement or alter the Scheme via Official Gazette notifications, according to the ET report.Section 4 specifies that individuals may contribute to the Fund, either for themselves or as guardians of minors. These contributions must comply with the maximum and minimum limits prescribed within the Scheme framework.
Kerala High Court’s examination of PPF account interest calculations
Following the analysis of account documents, the court determined that the total forfeited interest amounting to Rs 6,87,021 pertained solely to the minor accounts until they reached legal age.Subsequently, the operations of these accounts continued with regular payments and interest disbursements by the appellants to the respondents. There remains no contention regarding the interest disbursements following the attainment of majority age.Minor attained majority on December 24, 2005:
Source: ETThe interest forfeiture spans distinct periods for each child: for the first child from March 20, 2002 to March 16, 2005, whilst for the second child from March 20, 2002 to March 24, 2007.Minor attained majority on September 26, 2007:
Source: ETThe Kerala High Court has clarified that under Scheme 1968, when a mother manages and makes deposits into her minor children’s accounts, the combined deposits across all three accounts will be considered together for the prescribed scheme limits.Analysis of the presented charts reveals annual breaches of established limits. The Post Office (appellants) failed to identify these irregularities until an internal audit in 2017 brought them to light. The court noted that paying interest above the prescribed limits constitutes unfair enrichment and places an unnecessary burden on public funds.
What does Kerala High Court ruling mean for your PPF deposits?
The Kerala High Court’s ruling on PPF accounts has substantial ramifications, particularly concerning accounts initiated by guardians for minor children, as explained by Gyanendra Mishra, Partner at Dentons Link Legal to ET.Gyanendra Mishra believes that the ruling definitively establishes the principle of deposit clubbing, with several key implications for investors:The verdict confirms that statutory deposit limits must account for both guardian and minor’s PPF accounts collectively. The combined yearly deposits must not surpass the limits set by the PPF Scheme, 1968.The court affirmed that postal authorities have the legal right to recover interest earned on deposits exceeding annual limits. The ruling precisely outlines when clubbing rules are applicable. Interest forfeiture applies exclusively to excess deposits made whilst the account holder was a minor. Deposits and interest accrued post-majority remain unaffected, with accounts then considered autonomous.This verdict, which supersedes a previous Single Judge’s ruling favouring the investor, establishes a clear legal framework. It alerts guardians managing PPF accounts for minor children to monitor their cumulative annual contributions across associated accounts to prevent penalties.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.”Deepak Kumar, Partner at Khaitan & Co told ET that there is a pressing need for PPF regulatory bodies and relevant authorities to inform individuals about both benefits and restrictions of PPF accounts opened for their minor children. Regular advisories should be issued warning against over-contributions, as these can result in substantial financial losses owing to interest forfeitures on amounts exceeding legally prescribed limits, he adds.
