As part of the Beti Bachao, Beti Padhao campaign started by the Government of India, Prime Minister Narendra Modi launched the Sukanya Samriddhi Yojana (SSY) in 2015. This government-backed small savings scheme is meant to benefit the girl child. This scheme allows parents of a girl child under 10 years to open an account at designated banks or post offices.
The scheme has been exclusively designed to allow parents of a girl child to make small deposits each year such that the funds can cover the education and marriage expenses of the child once she grows up. It also pays a comparatively higher interest rate along with few tax benefits.
Features of Sukanya Samriddhi Yojana
The SSY scheme allows a parent or family member to open an account in the name of the girl child with a post office or authorized bank. Most banks allow an online application process, whereas an applicant may have to physically visit a post office for account opening.
Investors of an SSY account must make yearly deposits in the SSY account until 15 years from the account opening date. While the deposits made each year continue to accumulate until the maturity or end of tenure, no deposits are required between the 16th-21st year.
The government pays a fixed annual interest on the deposits made in the account. The interest calculation is done on the lowest balance maintained in the account between the end of 5th day till the end of month. Therefore, it is best to make deposits in the account within the first 4 days of any month to ensure maximum benefits.
The government declares interest rates on the SSY scheme every quarter. The ongoing interest rate for July-Sep 2021 is 7.6% p.a.
A Sukanya Samriddhi account has a fixed tenure of 21 years or until the girl child gets married after attaining 18 years of age. At maturity, the scheme pays out the accumulated principal amount along with the accrued interest amount to the beneficiary child. The account has to be managed by the parents or guardian till the girl child attains 18 years of age, after which the girl child can herself operate the account by furnishing relevant proof of age.
Eligibility criteria for enrolling in Sukanya Samriddhi Yojana (SSY)
Mentioned below are the eligibility criteria for enrolling to SSY scheme and account opening:
- Account can be opened only by parents or legal guardians of the beneficiary girl child
- At the time of account opening, the beneficiary girl child must be under 10 years of age
- Only one account is permitted to be opened under the name of one girl child
- Applicants can open up to two SSY accounts per family, one account for each girl child
Exceptions to the limit of two accounts per family are-
- A third account is permitted for a girl child if she is born before twin or triplet girls are born in the family.
- A third account is permitted for a girl child if she is born after the birth of triplets in the family.
In case twin or triplet girls are born before the birth of another girl child, a third SSY account is not permitted to be opened for the family.
Some of the noteworthy benefits of the SSY scheme are:
- Flexibility of deposit amount
The account allows a minimum deposit of Rs. 250 per year and a maximum deposit of Rs. 1.5 lakh per year. Thus, people from different financial backgrounds can invest and benefit from the scheme.
- Guaranteed returns
Since this scheme is government-backed, it offers guaranteed returns with minimal to no risk attached.
- Tax savings
Investors of this scheme can claim income tax deduction benefits under Section 80C of up to Rs. 1.5 lakh per financial year.
- Higher returns
Currently, the interest rate on the SSY scheme is set at 7.6% per annum. This is higher compared to some of the other government-backed tax saving schemes like PPF.
- Compounding benefit
This scheme is ideal for long-term investment, since it offers the advantage of annual compounding. Thus, small investments in this scheme can also offer good returns in the long term.
An SSY account can be transferred from one bank or post office to another in case of location transfer of the parent or guardian responsible for operating the account.
How to invest in the Sukanya Samriddhi Yojana?
An SSY account can be opened at the nearest post office or designated branches of associated banks. As part of the account opening formalities, here are some of the requirements:
- Investors must fill the Sukanya Samriddhi Yojana (SSY) application form which can be availed from a nearby post office or associated bank. It is also available for download from the following sources:
- Websites of public sector banks (SBI, PNB, BoB, etc.)
- The Reserve Bank of India Website
- The India Post Website
- Private sector bank websites (e.g. ICICI Bank, Axis Bank and HDFC Bank)
- Along with the application form, investors or applicants must submit KYC documents, including passport, Aadhaar card, etc and initial deposit amount through cheque/demand draft.
Taxation exemption on Sukanya Samriddhi Yojana investment (SSY)
SSY investments form part of the EEE (Exempt, Exempt, Exempt) investment bucket. Thus, the principal amount invested and interest earned yearly and earnings at maturity are tax free. As per existing taxation rules, the tax deduction benefit on the principal amount invested is up to Rs 1.5 lakh per annum under Section 80C of the Income Tax Act, 1961.
Although investing in Sukanya Samriddhi Yojana can benefit a girl child when she grows up, it is best for parents or guardians to simultaneously invest in other avenues, such as mutual funds to maximise overall benefits that can be availed in the future.
- What if I fail to deposit the minimum amount in the SSY account?
In case you fail to make a minimum deposit in the SSY account, a penalty of Rs. 50 is applicable during a financial year. Also, the account will be termed as a ‘default’ account.
- Can I continue investing in the SSY scheme even if my girl child has moved to another country?
If a girl child becomes an NRI or loses Indian citizenship, the SSY account will be terminated. Therefore, you cannot continue investing in it.
- Is premature closure or withdrawal allowed in an SSY account?
Premature closure can be done only once a girl child attains 18 years of age and requires funds for marriage purposes. Partial withdrawal is permitted of up to 50% of the accumulated corpus once the girl attains 18 years of age to meet higher education expenses or marriage expenses. Partial withdrawals are also allowed in case of the demise of the girl child or financial troubles faced by the depositor.
- How can I transfer my SSY account?
To transfer your SSY account from a post office or bank, you must fill in and submit the transfer request form where your account is currently held. Transfers are also allowed between different branches of the same bank.
- Can I take a loan against the balance in the SSY account?
A loan facility is not available against SSY account balance.