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Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana is an initiative launched by Prime Minister Narendra Modi as a part of the “Beti Bachao – Beti Padhao” campaign. The sole objective of this tax-saving scheme is girl child prosperity.

What is Sukanya Samriddhi Yojana?

Sukanya Samriddhi Yojana is a government savings scheme with an intention to secure a girl child’s future. The girl child must be 10 years of age or younger to open an account under this scheme. This scheme carries a higher rate of interest, tax deduction, and other benefits as well.

Eligibility for Sukanya Samriddhi Yojana scheme

The eligibility criteria for Sukanya Samriddhi Yojana (SSY) scheme is listed below;

  1. The girl child must be ten years of age or younger.
  2. The account is opened by the guardian or either of the parents of the girl child.
  3. Only one account can be opened per girl child.
  4. A family can open a maximum of two SSY accounts, i.e. secure two girls under this scheme.
  5. In the case of twin girls, the third account can also be opened.

Interest rates on Sukanya Samriddhi Yojana

The interest rate is fixed by the government and reviewed quarterly. The interest is compounded annually. The interest rate for the financial year 2019-2020 is 8.50%.

Tax Benefits of Sukanya Samriddhi Yojana (SSY)

The principal amount payable is allowed as a deduction under section 80C. The interest earned during the entire period of investment and the maturity value is tax-free.

How to invest in Sukanya Samriddhi Yojana (SSY)?

The Sukanya Samriddhi Yojana (SSY) scheme account can be opened at a post office, designated branch of a nationalized banks or a private bank. 

The application form along with the below mentioned documents

  1. Birth certificate of the girl child
  2. Address proof of the applicant parent or guardian 
  3. Photo ID of the applicant parent or guardian
  4. KYC proofs i.e Aadhar card, PAN, Voter ID, and Passport

Critical features of Sukanya Samriddhi Yojana scheme

FeaturesRequirements
Amount of investmentThe minimum amount of investments must be Rs 500
The maximum amount of investment can be up to rs 1.5 lakhs
Maturity of investmentThe account matures once the girl child is 21 years of age or on occasion of marriage after attaining 18 years of age
Investment PeriodThe investment can be made up to 15 years, after 15 years the account continues to earn interest until the maturity of the account
Account under defaultAn account is held ‘Account under default’ if the minimum amount of investment is not made in a financial year.

Sukanya Samriddhi Yojana (SSY) withdrawal rules

The amount invested in the scheme can be withdrawn after the completion of 15 years of investment or premature withdrawal.

Withdrawal on investment maturity

  • On maturity of the investment, the principal amount and interest earned can be withdrawn. The withdrawal is allowed on submission of the below documents:
  • Application form for withdrawal
  • ID proof and address proof
  • The withdrawal is allowed for higher education if the girl child is 18 years old and completed her 10th standard. The amount withdrawn must be used for paying the admission fee or any other fee charged by an educational institute.
  • The proof of admission to an education institute must be presented while applying for withdrawal such as fee receipt, admission card, and student ID.
  • The maximum amount allowed to be withdrawn is 50% of the total amount available in the previous financial year. The amount can be withdrawn in 5 installments or at once.

Premature withdrawal of investment

A premature withdrawal of investment is allowed on the occasion of the marriage of the girl child attaining 18 years of age. The application must be filed 1 month before the marriage along with age proof of the girl child.

Mutual Fund alternate to Sukanya Samriddhi Yojana (SSY)

The Sukanya Samriddhi Yojana (SSY) scheme is offered by the government to secure the future of a girl child. Children’s mutual funds are funds that serve the same purpose of securing a child’s future. This mutual fund carries a higher interest rate than other mutual funds.

What is the children’s mutual fund?

The children’s mutual fund can be made by the legal guardian or parents of the minor child to secure the future of the child. 

This fund is categorized as a balanced mutual fund or hybrid mutual fund.

The funds are invested in both equity-oriented mutual funds and debt-oriented mutual funds. The ratio of the investment depends on the scheme chosen by the parents.

If the funds are invested more than 60% in equity securities, it is termed as equity-oriented mutual funds. If the funds are invested more than 60% in debt instruments, it is termed as debt-oriented mutual funds.

Comparison between Sukanya Samriddhi Yojana (SSY) and Children’s Mutual Fund

ParticularsSukanya Samriddhi Yojana (SSY)Children’s Mutual Fund
Who can opt for the scheme?Only a girl childCan be opted for both girl child and boy child
Age LimitThe girl child must be of 10 years of age or youngerThe child can be 18 years of age or younger
Limit on accountsA maximum of 2 accounts per familyNo such limit
Return on investmentInterest rate is fixed by the government and reviewed quarterlyInterest income depends on the performance of the funds in the market
Tax BenefitThe principal amount, interest earned and maturity proceeds all are tax-freeNo tax implication until the redemption of the fund. On redemption benefit of indexation is available.
RiskNo risk since the scheme is operated by the governmentDepends on the market fluctuations and the risk an investor is ready to take as per his earnings and cost of living

Conclusion

Both schemes have their own benefits and limitations. While SSY is risk-free and offers tax benefits, an equity mutual fund offers higher returns. Both schemes will offer a good option for investment in the long term. An investor can divide their funds and invest in both the schemes to avail the maximum benefit and manage the limitations of risk.

Published on February 4, 2020