Sukanya Samriddhi Yojana: How the scheme offers highest tax-free return on your investment

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Sukanya Samriddhi Yojana (SSY) is the best tax saving option to secure your daughter's future. Parents can even save money for marriages of their two daughters with the help of this scheme. The scheme was started by PM Narendra Modi in the year 2015 for the benefit of the girl children.

If you need risk-free investment for your girl child, then SSY is the best saving scheme one can opt for. This scheme gives you the highest interest rate compared to any other tax-saving investment scheme. Presently, you can get 7.6 per cent interest under the scheme.

Here's how Sukanta Samriddhi Yojana offers highest tax-free return on investment:

• The investment amount in Sukanya Samriddhi Account (SSA) qualifies for tax deduction under Section 80C whereas its interest and withdrawals/maturity are tax-free.
• Being a small savings scheme, SSA is also covered by the sovereign guarantee, the highest form of capital protection that an investor can get.
• Sahil Arora, Director and Group Head, Investments, Paisabazaar.com. says- “It's current interest of 7.6% p.a. (compounded annually) is also the highest among all small savings schemes. Hence, SSA is certainly the best option for those preferring fixed income instruments covered by the sovereign guarantee for creating investment corpora for their girl children.”
• The only flip side of SSA is its lack of income certainty and long lock-in period. Unlike bank fixed deposits, the interest rate offered on SSA is not fixed.
• “As with other small savings schemes, the interest rate of SSA is reviewed by the Ministry of Finance in accordance with the government bond yields. Hence, the interest rate of SSA can remain static or move up or down in the next quarters depending on the movement of the government bond yields” adds Arora.
• According to Mrin Agarwal, Founder & Director, Finsafe – “SSY is a must-buy for girl child as it gives the highest tax-free fixed return. The scheme can be used to plan for girl child education as 50% of the corpus can be withdrawn at the age of 18yrs. If the account is opened when the child is below 5 years, then the scheme would compound over a long duration thus being useful for giving the girl child a corpus at marriage.”

Who can open SSY account?

• Anyone who is a resident of India can open SSY for their girl child.
• The age limit of a girl child for the opening of the SSY account is up to 10 years from the birth date of the child.
• After attaining 18 years of age, the girl can hold the account independently. One can deposit between Rs 250 and Rs 1.5 lakh in SSY account per financial year.
• One can deposit money up to 15 years from the opening of the account.
• One can open two or maximum of three SSY accounts if firstborn or second borns are twin girl children.

How to open SSY account?

The parent or legal guardian of a girl child can open the account at any Indian Post Office or authorized bank. One has to fill the form SSA-1 (Sukanya Samriddhi Account) available at any post office or authorized bank by giving all KYC details and girl child’s date of birth certification along with all required documents.

After verifying all the details and opening SSY the account holder will get the passbook.

SSY matures when the girl child turns 21 or until the marriage of the girl child after she turns 18-year old.

NRIs are not allowed to open SSY account for their girl child. This benefit is only for the Indians

Key points to note about SSY:

• Higher fixed rate of return (currently 7.6 per cent) as compared to other government-backed tax saving schemes such as PPF, NSC etc.
• The SSY account continues to earn interest rate even after maturity when no deposits are made into it
• Best long-term investment which provides the benefit of compounding.
• One can easily transfer SSY account from one part of the country to any other part (In case of parent/guardian's transfer)
• One can withdraw 50% of the balance lying in the account as at the end of previous financial year for the purpose of education, marriage after attaining the age of 18 years
• IN case of irregular payment/ revival of account one has to pay the penalty of Rs.50 per year along with the minimum specified amount per year.
• As per new rule, the default account will continue to get applicable interest even if the account is not restored/ closed after maturity.
• Now, premature account closure of SSY scheme is allowed only if the account holder or the girl child in whose name the account is maintained dies or on some valid grounds including medical treatment of the account holder for critical ailments or on death of the guardian
• Also, one can do the payment online apart from cash/cheque/DD.
• Due to Coronavirus, the Indian government has given some relaxation in the age limit to open SSY account
• According to the new rule, if your daughter has grown up to 10 years old from 25 March 2020 to 30 June 2020 and you could not open her account due to lockdown, then you have another chance to open SSY account by 31st July 2020
• Only to those who could not open the account due to lockdown can avail the benefit of this new rule. The age limit to open Sukanya Samriddhi Yojana Account on normal days is only 10 years.