Investments in Sukanya Samriddhi Account

What is Sukanya Samriddhi Account scheme?

Sukanya Samriddhi scheme is launched with a view to encourage savings and to promote the education of girl child. The money saved under the scheme will be convenient for pursuing higher education of girl child and incentives to parent/guardian under the Income-tax Act.

Who is eligible to open Sukanya Samriddhi account?

The account can be opened by the parent or legal guardian of a girl child of a less than 10 years of age. You as a natural or legal guardian of the children can open only one account in the name of one girl child and maximum two accounts in the name of two different girl children. In the case of the birth of twins or triplets, the condition of opening account only for two daughters is exempted.

Where to open this account?

The account may be opened either in an authorized bank or in a Post office with a minimum initial deposit of Rs.250/ (earlier which was Rs.1000/-).

What are the documents required for opening the account?

1. Proof of age (Birth certificate of the child), ii. Address proof, iii. Identity Proof

How much amount can one deposit in this account?

Subsequent to initial deposit of Rs.250/- (initially which was Rs.1000/- )you can deposit money to the account in multiple of Rs.100/-. No limit on the numbers of deposits in a month/year. The Deposit can be in lump-sum with the maximum amount of Rs.150000/- in a financial year.  However minimum Rs.250/- to be remitted to the account in a financial year failing which account is treated as discontinued and same can be revived with a penalty of Rs.50/- per year with minimum amount required for a deposit for that year. The Passbook facility is available to the account holder.

What is the tax benefit under the scheme?

The money deposited in Sukanya Samriddhi account  gets you a tax break within the overall cap of Rs.150000/- under section 80C of Income Tax Act.

Is there any limit for depositing money in the account?

After opening this account additional deposits not exceeding Rs.150000/- can be made for the next 14 years.

What is the maturity period of Sukanya Samriddhi account?

The deposit matures on completion of 21 years from the date it was opened.

Whether premature closure of the account is allowed?

The account can be closed before maturity only after the girl completes 18 years of age provided the girl is married.

 Whether partial withdrawal is permitted?

The scheme allows partial withdrawal of up to 50% of the balance standing at the end of preceding financial year for the purpose of higher education or pre-marriage expenses, provided the account holder attains the age of 18 years.

What happens if the account is not closed on maturity?

If account is not closed after maturity, the balance will continue to earn interest as specified for the scheme from time to time.

What is the return on investments?

The deposit currently yields an annual interest of 7.6% (yearly compounded). As per finance bill FY 2015-16 the maturity amount and interest earned on Sukanya Samriddhi account will be tax exempted.

The government had announced in February 2016 that small savings rates will be set quarterly instead of earlier system of announcing for every year so as to align them with the market rate of government securities.
To know the latest interest rate click on ‘Suknaya Sammriddhi scheme’

Which are the banks where I can open the account?

The following banks are the agency banks where you can open Sukany Sammriddhi Account.

State Bank of India/State Bank of Patiala/State Bank of Bikaner & Jaipur/State Bank of Travancore/ State Bank of Hyderabad/State Bank of Mysore/Andhra Bank/ Allahabad Bank/Bank of Baroda/Bank of India/Punjab & Sind Bank/Bank of Maharashtra/Canara Bank/Central Bank of India/ Corporation Bank/Dena Bank/Indian Bank/Indian Overseas Bank/ Punjab National Bank/Syndicate Bank/UCO Bank/Oriental Bank of Commerce/ Union Bank of India/United Bank of India/Vijaya Bank/Axis Bank Ltd./ICICI Bank Ltd./IDBI Bank Ltd.

Queries on the Scheme.

1. How this product is different from PPF account?
2. No clarity on tax regime?
3. My daughter is already completed 10 years of age, whether I can open account in her name.
4. Whether grand parents can open the account to avail tax benefit?
5. Whether SSS is the best way to invest for girl child’s education or marriage.

Our opinion:

1. Although the structure of PPF and Sukany Samriddhi Scheme looks similar, the later one is a better investment alternative at present in terms of return on investments. Both PPF and Sukanya Samriddhi schemes are linked to the government bond yield. But PPF offers only 25 basis points (0.25%) over the yield on the 10-year government bonds whereas Sukanya Samrridhi Scheme offers 75 basis points (0.75%) over the 10-year government bonds.
2. Investment under Sukanya Samrridhi Scheme is eligible for deduction under section 80 C of IT act (total deduction under 80 C at present is Rs.1.50 lakh at present. The Sukany Samrridhi Scheme also enjoys  tax free status like PPF and EPF under EEE (Exempt-Exempt-Exempt) tax regime.
3. The account can be opened in the name of a girl child who is not more than 10 years of age. However as a SPECIAL CASE, only for this year, the government has allowed an account to be opened in the name of girls who will be less than 11 years as of 1^st December 2015.
4. The scheme allows opening of minor account only by parents or legal guardian.
5. The deposit matures on completion of 21 years from the date it was opened. The account reliese on market-based returns. Therefore, you are not sure of getting the assured result at the end of the day and that is something that you should think about. Secondly, returns might fall short of the targets in a long-term situation where the chances of inflation rate end up eating the returns in terms of purchase value
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