The government has recently increased interest rates on various small savings schemes like PPF, MIS and NSC, and Sukanya Samriddhi Yojana is one of them. Thus, if you have a girl child and want to invest in a good investment scheme for her marriage, education or financial future, then Sukanya Samriddhi Account Scheme (SSAS) may be a good investment option as the government has recently increased the interest rate on this scheme substantially — from 8.1 per cent to 8.5 per cent – which will become effective from October 1, 2018.
Anyway this scheme – which was launched by the Modi government in January 2015 as a part of their ‘Beti Bachao, Beti Padhao’ campaign – is supposed to be a very good scheme for the financial future of one’s girl child. That is because apart from higher interest rates and the backing of the government, the scheme also provides tax benefits, and the account can be opened easily at any branch of authorised commercial banks or the Indian Post Office.
Financial experts say that with the enhancement in the rate of interest on small saving schemes, the interest rate of Sukanya Samriddhi Scheme has also been increased from 8.10 per cent to 8.50 per cent. Only the deposits under the Senior Citizen Saving Schemes enjoy higher rate of interest of 8.70%, which is provided to help senior citizens get better returns as compared to other investment avenues.
“The interest on PPF account has also been raised to 8%, which is lower than that provided on the Sukanya Samriddhi Scheme. Though the tax benefits attached to both the schemes are similar, but due to higher rate of interest on deposits under the Sukanya Samriddhi Scheme, it is the best scheme available for you to accumulate funds for your girl child. Since the contribution to the Sukanya Samriddhi Scheme qualifies for deduction under Section 80 C, it is tax effective for the parents who have daughters as you can contribute for maximum of two daughters,” says Balwant Jain, a tax and investment expert.
Moreover, since the gifts to your children is tax exempt under Section 56(2)(x), there is no tax implication at the time of making contribution to the account. “Though the incomes of minors are required to be clubbed with the income of parents, but since the interest on Sukanya Samriddhi Scheme is exempt under Section 10 (11A) of the Income Tax Act, there is no tax implications on the interest accruing to this scheme. The corpus at the maturity of the account is tax free in the hands of the daughter. This scheme helps the parents of daughter to accumulate corpus for the girl child, which can be used for her marriage or her education when she turns 18. The maturity proceeds at the age of 21 years of the daughter come absolutely tax fee in her hands,” informs Jain.
The Sukanya Samriddhi Scheme also scores over the PPF account due to its higher rate of interest. Moreover, if the account under the scheme is opened when the girl joins a school or before she completes 10 years, the lock-in period is also smaller to the PPF account. Therefore, this seems to be the right time to invest in the Sukanya Samriddhi Scheme.
Santosh Agarwal, Associate Director and Cluster Head-Life Insurance, Policybazaar.com, says, “Investors should take advantage of the interest rate hike and lock in their investments with higher yields at this point of time. If you have a girl child and want to build a corpus for her future planning, this is a very attractive scheme given 8.5% interest rate. The scheme also provides income-tax benefits under Section 80C of the Income Tax Act, 1961. Even the returns are tax-free and one can deposit up to Rs 1.5 lakh per financial year.”
Here are the main features of Sukanya Samriddhi Yojana, especially for those who are new to this scheme:
1. A Sukanya Samriddhi account can be opened by a legal or natural guardian of a girl child, in her name.
2. Only 1 account is allowed to be opened by a guardian in the name of 1 girl child and maximum 2 accounts in the name of 2 different girl children.
3. The Sukanya Samriddhi account can be opened up to the age of 10 years from the date of birth of a girl child.
4. A minimum of Rs 250 and a maximum of Rs 1,50,000 can be deposited every year for 15 years from the date of opening of the account.
5. The account matures on completion of 21 years from the date of opening the account. Once the account matures, you can withdraw the maturity amount along with the interest accrued.
6. Once the Sukanya Samriddhi account reaches its maturity, it stops earning interest.
7. If the concerned girl gets married before the account matures, the balance amount can be withdrawn, provided the girl is 18-year old at the time of such withdrawal. For this an affidavit has to be produced.
8. When the girl child either passes 10th standard or turns 18, partial withdrawal can be made from the account. A maximum of 50% of the deposit made towards the account can be withdrawn to be used for higher education of the girl child.
9. For withdrawing the maturity amount, the girl child is the only authorised person.
10. This savings scheme is completely tax-free. The initial amount deposited, the interest earned throughout the investment period and the final maturity amount received all are exempted from taxes.