Sukanya Samriddhi Account is a special scheme for girl child. In compliance of announcement made by Finance Minister Arun Jaitley in his Budget Speech 2014-15 the Government of India has introduced a new scheme named “Sukanya Samriddhi Account” vide Notification No.GSR No.863 (E) dated 2nd December,2014. It is is launched by honorable Prime Minister Narendra Modi on January 22, 2015 as a part of “Beti Bachao- Beti Padhao” initiative. This scheme is specially designed for girl child which aims at contributing towards higher education or marriage needs. This is a small saving scheme which offers 9.1% interest rates for Financial year 2014-15. Also the amount deposited under Sukanya Samriddhi Account is exempted u/s 80C.
The features of Sukanya Samriddhi Account
- Guardian or parent can open Sukanya Samriddhi Account in the name of the minor girl child till 10 years of age.
- Minimum deposit is Rs 1,000 and in multiples of Rs 100 thereon.
- Maximum deposit can be made is Rs 1.5 Lakhs in a financial year.
- In case minimum amount is not deposited in any financial year, you can re-activate by paying a penalty of Rs 50 per financial year and by depositing any minimum deposits of backlog.
- Interest rates are 9.1% for financial year 2014-15 subject to change in every financial year. The interest will be compounded annually and it will be credited to the account at the end of each financial year.
- You can open Sukanya Samriddhi Scheme account at any Post Office or at any authorized branches of commercial banks in India.
- The amount can be deposited through Cash or Cheque or Demand Draft.
- Passbook is given where deposits and interest credit transactions would be updated.
- The deposit is to be made till the end of 14 years from the year of opening of account.
- To meet higher education expenses, partial withdrawal is allowed up to 50% of the balance accumulated till the end of the last financial year. This is allowed after girl attained 18 years of age.
- Account would be active till girl attains 21 years of age or during marriage after 18 years of age. If parents want to close the account before 21 year for marriage purpose, they have to give an affidavit that the girl has reached at least 18 yr of age. This provision is kept so that early marriage is prevented before 18 years of age.
- Sukanya Samriddhi Account can be transferred anywhere in India in case girl moves from one city to another.
How to open Sukanya Samriddhi Account;
To open this deposit scheme, parent/guardian can take their Address proof, Identity proof along with a girl child’s birth certificate and approach any post office or authorized branches of commercial banks.
How good it is in comparison to PPF;
Sukanya Samriddhi Account Schemes is locked for 21 years or at girls marriage after 18 years whereas PPF (Public Provident Account) account on the other hand has lock-in period of 15 years. The rate of Sukanya Samriddhi scheme currently offers 9.1% for this financial year. In case of PPF on the other hand, it offers around 8.7%, but both these account scheme’s interest are subject to change every financial year as per govt notification. With regards to partial withdrawals, in Sukanya Samriddhi scheme, it is allowed after 18 years of age to the tune of 50% for the education purpose and rest has to be left in the account so that it can be used for the marriage purpose. In PPF , partial withdrawal are allowed after 6 years with certain conditions.
What makes Sukanya Samriddhi Account Scheme less lucrative;
- Lock-in period of this scheme is 21 years or at marriage after 18 years of age. Partial withdrawals for education is allowed at 50% of the accumulated corpus after 18 years of age. Will it enough to meet desired requirement?
- Returns of 9.1% or future interest may not meet future expenses as the cost of education / marriage expenses has been boosting year on year at higher rate.
- Parent / Guardian can open only 2 Sukanya Samriddhi Accounts. If they have more than 2 girl children, they cannot open more accounts.
- Unlike PPF or Saving bank account, you can’t deposit the money online as of now, which will really discourage those investors who are too much into online transactions.
- There is no guarantee of getting higher interest rates in future. They are fixed every year by Central Government as it does for PPF account.
Maturity amount taxation is still not clear. In case it is taxable, this would make this scheme not attractive if compared with rate of inflation and post tax yield specifically to those investors into higher tax bracket. With the union budget 2015, it has been announced, even maturity proceeds & interest earned will be tax free.
Should you consider opening Sukanya Samriddhi Account Scheme?
This is really a good investment to ensure a dedicated accumulation for a girl child for her future. Investor with lower tax bracket can be benefited with such moderate investment with pretty good rate of interest.
Remember! the interest earned on this deposit will be taxed in the hands of the guardian. So highest taxable individual should do their math first before opting this. Even though interest earned is tax free now, but one has to compare the real rate of return with inflation.
Apart from emotional touch (this scheme really mean it though) if proper calculations of income, pay-out, taxes etc are done with diligent regular investment then you can gift your kid much more than this 🙂 In fact matching to the risk tolerance, one can go for Long Term Debt fund which will give similar returns with indexation benefits else PPF or adding more into EPF/VPF could be other alternative best idea.
In case you are ok to take little beat of risk, then a part of committed regular investment amount for your child can be invested equity mutual fund to reap better returns in long run.
Finally choice is with you! So share your thoughts.