Can Sukanya Samriddhi Yojana Be a Good Investment Plan for Your Girl Child?

January 31, 2022 Mutual Fund

Launched by Honourable Prime Minister Narendra Modi in 2015, Sukanya Samriddhi Yojana is a government-backed welfare scheme developed as a part of a ‘Beti Bachao, Beti Padhao’ campaign, specifically designed for the financial needs of the girl child. This scheme gives a parent or guardian the opportunity to open a Sukanya Samriddhi Yojana (SSY) account to build a corpus in the name of a girl child aged ten or below.

What is Sukanya Samriddhi Yojana?

Sukanya Samriddhi Yojana is a government-backed saving scheme designed for the equal rights and betterment of the girl child in India. The scheme aims at financially securing the future of a girl child by helping the parents build a corpus for their child’s future goals, such as higher education, wedding, etc.

Some key features and eligibility criteria of the scheme are as follows:

• The scheme is specially designed for a girl child

• It is a government-backed saving scheme

• Only one SSY account can be opened per girl child

• The scheme allows only parents or legal guardians to open the account in a girl child's name

• The girl child should be aged 10 or below at the time of opening of an account

• The minimum investment starts with Rs 250 and can go up to Rs 1,50,000

• Deposits can be made in the account till the completion of 15 years from the opening of the account

• The returns are higher compared to other fixed-income schemes

• It has a lock-in period of 21 years

• A partial withdrawal is permitted after the girl child completes 18 years

• The SSY account can be opened in any bank or post office

• Maximum two Sukanya Samriddhi Yojana accounts are permitted per family, i.e. one for each girl child

• A penalty of Rs 50 will be charged if a minimum deposit of Rs 250 is not made to keep the account active

• SSY account can be opened for more than two girls in a family in this special case:

  If a girl child is born before the birth of twin or triplet girls or if triplets are born first, then a third account can be opened. However, if a girl child is born after the birth of twin or triplet girls, a third SSY account cannot be opened.

• The bank or post office where you have opened the account will provide you with a Sukanya Samriddhi Yojana passbook. It will contain your personal information, such as name, SSY account number, and transactions in the SSY account (deposits, withdrawals, interest accrued).

• NRIs are not eligible to open a Sukanya Samriddhi Yojana account as of now

What are the rules for premature withdrawal of Sukanya Samriddhi Yojana?

In case of marriage:

• A premature withdrawal of Sukanya Samriddhi Yojana is permitted if a girl child attains the age of 18 and is getting married.

• A girl (child) has to apply for a premature withdrawal at least one month before marriage or three months after the marriage.

• The girl (child) will have to submit the identity proof and proof of marriage.

In other cases:

• If a girl migrates from the country and becomes an NRI, the concerned authorities need to be informed as soon as possible to get the account closed.

• In case of an unfortunate demise of the girl child, the parent/guardian can prematurely close the Sukanya Samriddhi Yojana account. The balance is transferred their account after submitting the relevant documents, such as the death certificate.

• The bank or post office can permit a premature withdrawal of the scheme after five years, in the case of the demise of the parent/guardian and the girl child is facing financial difficulties to survive.

What are the advantages of the Sukanya Samriddhi Yojana?

1. High-Interest Rate:

Sukanya Samriddhi Yojana offers a high rate of interest compared to other small saving schemes. The interest is compounded on a yearly basis and accrues monthly that helps you build a substantial corpus for your daughter’s future goals. You can use the Sukanya Samriddhi Yojana calculator available online to calculate the returns. The government announces the interest rate for Sukanya Samriddhi Yojana on an annual basis.

Here is Sukanya Samriddhi Yojana interest rate since inception:

2. Tax Benefit:

One of the biggest reasons for the success of this scheme is the tax benefit it offers. The Sukanya Samriddhi Yojana provides a tax deduction benefit of up to Rs 1.5 Lakhs, under Section 80C of the Income Tax Act, 1961. Moreover, the interest accrued as well as the maturity amount is exempted from the tax.

3. Compounded Interest:

The benefit of compounded interest makes a substantial difference in the total returns as it is a long term investment instrument.

4. Government-backed Scheme:

The Sukanya Samriddhi Yojana is approved by the Ministry of Finance, Government of India, and offers guaranteed returns on the maturity of the scheme.

5. Lock-in Period:

The SSY has a lock-in period of 21 years from the time of opening of an account, which ensures the parent/guardian do not use these funds for any other personal financial requirement and the maturity proceeds are paid to the girl child. Besides, for higher education, one premature withdrawal is allowed when a girl child attains the age of 18. However, the premature amount is restricted to 50% of the balance in the SSY account.

6. Flexibility:

A depositor has to make a minimum deposit of Rs 250 every financial year to keep the account active. So, in case the depositor had made a maximum investment in the last year but is unable to make the same amount of investment this year, a minimum deposit of Rs 250 can be made in order to keep the account active. Plus, the girl child can operate her account after attaining the age of 10.

7. Account Transfer:

A Sukanya Samriddhi Yojana account can be transferred to any other bank or post office in case the account holder has a change of residence/location.

How to open a Sukanya Samriddhi Yojana account?

An SSY account can be opened at any post office and participating public or private bank. As of now, there is no facility to open a Sukanya Samriddhi Account online.

You will be required to submit the birth certificate of a girl child and KYC documents of a parent or guardian, such as your photo, PAN Card, AADHAR Card, Passport, Driving License, along with a Sukanya Samriddhi Yojana form and a cheque or DD for an initial payment. Apart from this, a bank or post office may ask for any additional documents.

You can download the Sukanya Samriddhi Yojana form from;

• The Reserve Bank of India website

• The Indian Post website

• The official websites of the participating public or private banks

What are the downsides of a Sukanya Samriddhi Yojana?

1. Every year the government of India reviews the interest rate of the Sukanya Samriddhi Yojana and makes necessary changes. Hence, the higher rate of interest is not guaranteed as the government may cut it further if necessary.

2. Although the lock-in period ensures the funds are not used for personal requirements of the parents or guardians, the 21-years lock-in period might not be ideal for many.

3. The limitation on the number of girl children that can be added to the scheme is a deterrent. A third girl child is not eligible to get the benefits of the scheme.

4. The Sukanya Samriddhi Yojana account opening and operation has not been digitised and is not available online yet. This can be inconvenient for the individuals who are tech savvy and prefer to do all the financial transactions online.

5. Since the scheme is managed as per each year’s union budget and market performances, it can be susceptible to political instabilities.

In Conclusion…

Investing in the Sukanya Samriddhi Yojana is a wise choice if you are looking for a long-term scheme with guaranteed returns. However, you should remember that the government yearly reviews the scheme and can make changes in the interest rate if necessary. Before investing, it is advisable to use the online Sukanya Samriddhi Yojana calculator available on the websites of various participating banks to give you an idea of the returns.

This article first appeared on PersonalFN here