Investment decisions should be carried out after a proper analysis of available options and their specifications. Before one  starts investing, he/she is  required to consider certain factors such as Financial Goal, Returns, Interest Rates, Risks involved; that structure a portfolio. To ease the investment choices and facilitate future savings, the Government of India has launched numerous saving schemes each of which caters different financial requirements of the investors. Sukanya Samriddhi Yojana is such scheme launched by the Government of India.

What is Sukanya Samriddhi Yojana?

Sukanya Samriddhi Yojana is a government-backed savings scheme as part of the “Beti Bachao, Beti Padhao Yojana” for the benefit of the girl child. This scheme is launched on 22nd January, 2015 by our Prime Minister, Mr. Narendra Modi. A Sukanya Samriddhi Account has a tenure of 21 years or until the girl child marries after the age of 18. Parents can now open up to two SSY accounts for girls and a third account can be opened in case of birth of twins/triplets.

The Sukanya Samriddhi Yojana ( सुकन्या समृद्धि योजना ) interest rate for FY 2020 is 7.60% compounded annually. The interest rate is fixed by the government and revised quarterly.

Sukanya Samriddhi Yojana

Eligibility for Sukanya Samriddhi Yojana Account:

The following are the key eligibility criteria for opening a SSY Account as part of the Beti Bachao, Beti Padhao Yojana:

  • Sukanya Samriddhi account can be opened only in the name of girl child by her parents or legal guardians.
  • The girl child has to be below the age of 10 at the time of account opening.
  • Multiple Sukanya Samridhhi accounts cannot be opened for a single girl child.
  • Only two SSY accounts are allowed for a family i.e. one for each girl child.

Minimum and Maximum Amount for Sukanya Samriddhi Yojana Account:

The minimum annual contribution to the Sukanya Samriddhi Account is Rs. 250/- and the maximum of Rs.1.50 lakh in a financial year. You have to invest at least the minimum amount every year for up to 15 years from the date of account opening. Thereafter the account will continue to earn interest till maturity.

How to invest in the Sukanya Samriddhi Yojana?

You can invest in this scheme through your nearby post office or designated branches of participating public and private banks. You will need to submit KYC documents like Passport, Aadhaar Card, etc. along with the required form and initial deposit by cheque/draft. This wide reach is designed to help ensure success of the Beti Bachao, Beti Padhao Yojana.

Tenure of the Sukanya Samriddhi Yojana Account:

Sukanya Samriddhi Yojana has a tenure equal to the time the girl child is 21 years of age or upon her marriage attaining the age of majority (18 years). However, contributions only need to be made for 15 years. Thereafter the account continues to earn interest until maturity even if no deposits are made into the account it.

Benefits of Investing in Sukanya Samriddhi Yojana:

Sukanya Samriddhi Yojana( सुकन्या समृद्धि योजना ) introduced as part of the Beti Bachao, Beti Padhao Yojana initiative, provides investors with a range of benefits. Some of the key benefits of this scheme for the benefit of girl child are as follows:

  • Sukanya Samriddhi Account can be opened for more than two girls in some special cases which are-

1. If a girl child is born after the birth of twin or triplet girls, third SSY account cannot be opened.

2. If a girl child is born before the birth of twin or triplet girls, or triplets are born at first then a third account can be opened.

  • Provides tax deduction benefits under Section 80C up to Rs. 1.5 lakh annually.
  • Flexible investment option with minimum deposit of Rs. 250 in a year (max. Rs. 1.5 lakh per annum).
  • Guaranteed returns instrument backed by the Government of India (sovereign guarantee).
  • Higher fixed rate of return (currently 7.60% per annum for Q1 FY 2020-21) as compared to other  government-backed tax saving schemes such as PPF i.e.7.1% .
  • Long term investment hence provides the benefit of compounding.
  • Can be freely transferred from one part of the country to another (bank/post office) in case of transfer of parent/guardian operating the Sukanya Samriddhi Account.

Taxation of Sukanya Samriddhi Yojana Account:

From a taxation perspective, SSY investments are designated as an EEE (Exempt, Exempt, Exempt) investment. This means that the principal invested, the interest earned as well as the maturity amount, are tax free. Under existing taxation rules of Sukanya Samriddhi Yojana, 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.

Partial Withdrawal from Sukanya Samriddhi Yojana Account:

The girl can also avail partial withdrawal facility (not more than 50% of the balance) after attaining the age of 18 years for higher education expenses.

Premature closure of Sukanya Samriddhi Account:

Premature closure can only be done by a girl child on attaining the age of 18 years for the purpose of marriage expenses. However, there are some special cases under which the account can be closed and the respective amount can be withdrawn:

1. Untimely death of the account holder:

In case the registered girl child unfortunately dies, the parents or the legal guardian are eligible to claim the final amount on the account and accrued interest as well. The amount will be handed over to the nominee of the account immediately. Also, the parents or legal guardian are required to submit the relevant documents verifying the death of the account holder duly attested by the concerned authorities.

2. Inability to continue the account:

The Sukanya Samriddhi account can be prematurely closed if there is any kind of direction from the central government regarding the inability of the depository to carry forward the account. The closure can also be processed in case the contribution towards the account is causing any kind of financial stress to the depositor. Moreover, proper permission from the competent authorities must be generated to process the closure and settlement of the account.

3. Change of Citizenship:

The SSY account will have to be closed if the girl child becomes an NRI or loses her Indian citizenship.

It is to be noted that the closing of the account under Sukanya Samriddhi Yojana will only be catered under extreme cases such as life threatening diseases or medical emergencies. 

Loan:

Under existing rules, there is no option of availing a loan on the basis of the balance available in a Sukanya Samriddhi Account. This benefit is currently available in case of another government tax saving scheme – Public Provident Fund (PPF) account which offers the benefit of loan against PPF account from the third year of subscription onwards.

Conclusion:

The above scheme encourages parents to build a fund for the future education and marriage expenses for their female child with a host of benefits including tax benefits. While there are various other Yojanas introduced by GOI, however this is one of the schemes which can be considered for every parent as a gift towards their daughter.

Author Bio

Qualification: CA in Practice
Company: Adukia & Associates
Location: MUMBAI, Maharashtra, IN
Member Since: 19 Aug 2019 | Total Posts: 11
The author Rishabh Adukia is a Chartered Accountant and qualified professional advising on wealth management to individuals, millennia’s, emerging HNIs including others and can be reached on adukia.rishabh@gmail.com View Full Profile

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