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Investing for your daughter in Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana is a special initiative for the girl child and aims to encourage saving for her welfare


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Sukanya Samriddhi Yojana (SSY) is a tax-free small savings scheme for the girl child. It was launched on January 22, 2015. The parents or legal guardians of a girl aged upto ten years can open an SSY account in the name of the girl child in designated branches of public-sector banks or in a post office, with a minimum amount of Rs 250. It is a special initiative for the girl child and aims to encourage saving for her welfare.

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The depositor can open only one account in the name of one girl child and a maximum of two accounts in the name of two different children. However, the guardian can open the third account in the case of birth of twin girls in the second birth, or girl triplets in the first birth.

Capital Protection and Inflation Protection
Since the scheme offers a relatively fixed rate of interest, the capital is adequately protected. Since the returns are linked to the government bond yield, there is no assured inflation protection.

Guarantee
The interest rate for SSY is to be 75 basis points over the ten-year government bond yield. For the period July-September, 2019 the deposit will fetch an interest rate of 8.4 per cent. The rates will be revised every quarter and the new rates will be applicable to all subscribers.

Minimum Investment
The account can be opened with a minimum deposit of Rs 250. Failure to make payments as per the chosen frequency can lead to the deactivation of the account. It can then be revived only after paying a penalty of Rs 50 along with the missing payments. Deposits can be made multiple times in a year, with an upper limit of Rs 1,50,000.

Liquidity
Sukanya Samriddhi Yojana (SSY) account has a lock-in period of 21 years. However, once the girl attains the age of 18 years, pre-mature closure is allowed in case she gets married. She can also avail partial withdrawal, not exceeding 50 per cent of the balance, to meet the expenses for her higher education.

Tax Implications
The scheme comes under the exempt-exempt-exempt (EEE) category, where the deposits, the interest earned as well as the maturity amount are tax-free. The sum invested in the SSY scheme is eligible for tax deduction under Section 80C subject to a maximum of Rs 1.5 lakh per year. On maturity, the entire amount, including the interest, is tax free.

Where to Open the Account
The account can be opened at any post office in India doing savings bank work or at any branch of a commercial bank authorised by the central government to open an account under Sukanya Samriddhi Account Rules, 2014.

How to Open the Account
The parent/guardian can approach any post office or bank with the birth certificate of the girl child, along with the ID and address proof of the parent/guardian.

Points to Remember

  • This is a savings instrument created for the benefit of the girl child.
  • It can only be opened by parents of girls below the age of 10 and matures 21 years after the date of opening of the account.
  • The principal is eligible for tax deduction and the interest earned on it is tax free.
  • A minimum cash deposit of Rs 250 is required to open an account
  • Failure to make payments as per the chosen frequency can lead to deactivation of the account. A deactivated account can then be revived only after paying a penalty of Rs 50, along with the missing payments.

Features at a Glance
Eligibility:
You need to be a resident Indian and parent/legal guardian of the girl child.
Entry age: Parents or legal guardian of a girl child who is ten years or less can open an SSY account
Minimum Investment: Rs 250 per annum
Interest: 8.4 per cent for the period July-September, 2019. Interest rates are subject to revision every quarter.
Tenure

  • The account will mature 21 years after the date of opening of the account
  • Up to 50 per cent of the corpus can be withdrawn once the girl turns 18

Account-holding categories: Girl child under ten years through the parents or legal guardian.

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