There are several ways to invest for your girl child’s future and simultaneously save income tax. One of such innovative ways is to invest in Sukanya Samriddhi Yojana (SSY) Account. The Sukanya Samriddhi scheme especially encourages parents/legal guardians to save for their daughter’s higher education and marriage. The current Sukanya Samriddhi Account interest rate is 7.6% for the quarter ending in June 2020.
The scheme provides tax exemptions under Section 80C of the Income Tax Act, 1961. It aims to secure a girl child’s future to avail enough funds at the end of the account’s maturity (i.e. 21 years), or anytime in between due to certain circumstances. All the withdrawals be it on maturity or partially in between, are tax-free.
In this post, we will discuss about Sukanya Samriddhi Yojana and its details such as deposit amount, eligibility criteria, how to open an SSY account, lock-in period, interest rate, tax benefits, number of accounts, transfer of accounts, withdrawal on maturity, partial withdrawal, premature closing of the account, and frequently asked questions.
Sukanya Samriddhi Yojana is a fixed income investment. It is a scheme by the Government of India, launched in 2015. It is a part of the campaign – Beti Bachao Beti Padhao. The scheme encourages you to save for the girl child’s future. You can make regular deposits in this account and earn interest on it. As per the Income Tax Act of India, you can claim tax deductions up to Rs. 1.5 lakhs under Section 80C in a financial year (FY) on contributions to SSY.
1. Deposit Amount
Every year, the minimum deposit amount is Rs. 250. This needs to be constant for at least 15 years. The account will be discontinued if you fail to save the minimum amount in a given year. But you can reactivate the account after payment of Rs. 50 as penalty and depositing the minimum deposit amount.
2. Eligibility Criteria
Here are the Sukanya Samriddhi Account eligibility criteria:
For beneficiary (the girl child)
For those who will operate the account
3. How to Open a Sukanya Samriddhi Account?
To apply for Sukanya Samriddhi account for your daughter, you have to visit an authorized bank or post office that offers this scheme. The customer representative will provide you the application form. You need to duly fill and sign the application form, and submit it with the below mentioned documents:
4. Lock-in Period
The lock-in period for SSY is 21 years. For instance, if you opt for this scheme when your daughter is 6 years old, it will mature when she attains 27 years of age.
5. Interest Rate
The rate of interest is fixed by the government in every quarter. The interest rate was 7.6% per annum for the quarter ending in June 2020. The interest is compounded annually. Also, the interest earning is payable only on maturity. You can also receive the earning if there is a change in your daughter’s citizenship status or residency.
6. Tax Benefits
This SSY scheme has the status of EEE or exempt-exempt-exempt. You can build a corpus for your daughter as well as meet your tax-saving goals with this scheme. Here are the Sukanya Samriddhi Yojana tax benefits:
7. Number of Accounts
You can open two accounts in name of one family but only one account in the name of your girl child. If you have triplets (all females), then you are allowed to open more than two accounts. This is applicable even if your first child is a girl, and later on you get twin girl babies.
8. Account Transfer
On change of residence, it is possible to transfer the Sukanya Samriddhi Account balance to any bank branch or post office in India, or from a post office to a bank, without paying any fee. However, you have to provide the proof of address for this purpose. You will have to pay a fee of Rs. 100 if the account transfer is done under any other circumstances.
You can withdraw the balance and interest earning on completion of 21 years of the SSY account. Remember, if you fail to withdraw the balance after 21 years then the accumulated balance does not earn any interest. The beneficiary will receive the interest accrued and balance when the account matures. There is no need to pay any tax on withdrawal. To withdraw an amount, all you have to do is submit an application form for withdrawal, citizenship proof, residence proof, and identity proof.
1. Partial Withdrawal
You can make partial withdrawals for two reasons, either for the girl child’s higher education or marriage. In such a case, you can withdraw up to 50% of the balance in SSY account. If the reason for withdrawal is higher education, then the daughter must have completed the tenth standard. Also, the account holder must be at least 18 years of age.
2. Premature Closing of Account
You can opt for premature closure of Sukanya Samriddhi account for the following reasons:
Given below are some of the FAQs on SSY Account:
To apply for a new SSY account, you need to visit a participating private/public sector bank or post office. You can also download the Sukanya Samriddhi account application form here on the RBI website. Alternatively, you can download the same from the website of relevant bank or Indian Post Office.
If you have the SSY account in a participating bank, then you can check the account balance through mobile banking or internet banking. But for this, your SSY account must be linked to the existing net banking account to access the account records. You can also visit the bank physically to get the passbook updated for the account balance. If you have the SSY account at an Indian Post Office, then you have to visit the branch physically for passbook update and check the account balance.
While SSY account has maturity period of 21 years, the ELSS (Equity Linked Saving Scheme) has a lock-in period of only 3 years. The ELSS is also another tax-saving instrument, just like the SSY scheme. An advantage of investing for long-term in ELSS is that you may earn double digit returns.
The SSY is exempted from taxes and backed by the government. It is best suited for long-term savings and investment for your daughter’s education or marriage. But, the maturity period of this scheme is 21 years, a lot more than that of a bank’s FD (fixed deposit). However, interest earnings from bank’s FDs are taxable.
PPF or Public Provident Fund is a long-term investment tool. It comes with a lock-in period of 15 years. You can deposit up to Rs. 1.5 lakhs in a year for all the accounts you open for yourself or on behalf of your child. You can open a PPF account in your minor child’s name. The minimum investment amount is Rs. 500. Like Sukanya Samriddhi Yojana Scheme, PPF also helps to build corpus for your girl child’s future. It also comes with tax benefits for all PPF account of self and that on behalf of the child, under Section 80C of the Income Tax Act, 1961.