What is Sukanya Samriddhi Scheme and should you invest in it?

Sukanya Samriddhi Account is a welcome step by the govt. of India which is a part of its  “Beti Bachao  - Beti Padhao” initiative and was launched on 22nd January 2015. It is a  small savings scheme, which can be opened by the parents or a legal guardian of a girl child in any post office or authorized branches of some of the commercial banks. Let’s understand in detail: -

What is the Return on Sukanya Samriddhi Scheme?

The interest rate offered on this scheme was flagged off with a 9.1%, which is further increased to 9.2% for the financial year 2015-16. This interest rate is not fixed and is subject to a revision every financial year like PPF.

Who can open this account? 

Parents or a legal guardian can open an account in the name of a girl child right from the birth of a girl child till she attains the age of ten years. Government has allowed a one-year grace period to make the eligible age till 11 years of completion. 

How many accounts one can open?

Only one account can be opened per girl child to the maximum limit of two children except in a case of twins or triplets, wherein this facility would be extended to the third child which means you can even open three accounts in case you are blessed with twin girls on the second occasion or in case the first birth itself results into three girl children.

What is Minimum & Maximum Investment amount I can make?

To keep your account active, you need to deposit a minimum of Rs. 1,000/- in a particular financial year, failure to do so will make this account inactive.  The same can be activated again by paying a penalty of Rs. 50/- along with the minimum amount required to be deposited for that year i.e. Rs. 1,000/- at present. The maximum amount, which can be invested in this, is Rs. 1,50,000/- in a year and there are no limits to the no. of times you can make these contributions. 

What is the duration of Sukanya Samriddhi Scheme?

The total duration of the scheme is 21 years and it will mature on the completion of 21 years right from the date of opening of this account. One can even continue to earn interest as specified every year if account is not closed after completion of 21 years.

Do I need to make contribution every year?

No, you have make contribution to this scheme for the first 14 years only eventhough the scheme has a duration of 21 years, post that there you do not need to deposit further amount but your account will keep earning the interest rate applicable for the remaining 7 years.  

Can I close it Prematurely?  

Yes, this account can be closed prematurely when your daughter completes 18 years of age and provided she gets married before the withdrawal. Since the maximum permissible age is set as 10 years, the scheme by default carries a minimum duration of 8 years.

Can I make a Partial Withdrawal?

Yes, you can withdraw partially to the extent of 50% of the balance standing at the end of the preceding financial year but only in a case when your daughter attains the age of 18 years. This make sure that you have a lock-in period of at least 8 years and one cannot withdraw any money form the account before that.

Who will receive the Maturity proceeds?

On maturity of this account, the entire proceeds i.e. account balance along with the interest as accrued on the account will be paid to the account holder i.e. girl child directly. It gives a good financial independence to the girl, which indeed is a good move.

Can I make online payments to this scheme?

No online payments can be done at the moment and deposit can be made only by cheque, cash or a demand draft. 

Taxability of Sukanya Samriddhi Account!

The best part of this scheme is that it offers complete tax-free treatment on interest income and as well as the maturity proceeds. It comes under EEE regime i.e. it is totally exempt at all the stages like on deposit, exempt on returns, exempt on maturity.

Tax benefit for investment made in Sukanya Samriddhi Account!

Now the erstwhile popular section 80C also includes the investment made in Sukanya Samriddhi Account to the extent of maximum limit of Rs. 150000/- , all the contributions to the limit as mentioned will be eligible for tax saving u/s 80C apart from PPF/MF ELSS/Insurance premium/NSCs/PF etc.

Should you open Sukanya Samriddhi Account for your daughter?

On closely observing the scheme you will find that it is very similar to one of the other most popular tax free tax saving investment option i.e. PPF (Public Provident Fund) which offers tax free returns of 8.7% and keeps changing every year as notified by the government. The other similarities are in terms of its lock-in, passbook facility, partial withdrawal and taxability; so the question, which needs to be asked whether Sukanya Samriddhi scheme is better than PPF or any other fixed returns bearing instrument per se? If you look at the overall intention of the government, then I think it is a well-intended financial product but still cannot beat PPF except with slightly higher rate of returns. But at any point of time, it is way better than all the traditional so called child insurance plans i.e. insurance policies which are prominently sold in the disguise of safeguarding your children’s future, rather it only safeguards the agents future, so in comparison to those wrongly bought or sold child plans, Sukanya Samriddhi schemes is a good option to go with. After all having a girl child is a bliss and why not secure our ghar ki Laxmi by investing for her better future, beti bachao- beti padao!