Sukanya Samriddhi Yojana: A tax-free small savings scheme for the girl child

What is Sukanya Samriddhi Yojana?
The 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 girls aged 10 or below 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.

Features of Sukanya Samriddhi Yojana

• Eligibility: You need to be a resident Indian and parent/legal guardian of the girl child. A maximum of two accounts for two girls.
• Entry age: Parents or legal guardian of a girl child who is ten years or less can open an SSY account.
• Account opening fee: No fee. A minimum cash deposit of Rs 250 is required to open an account.
• Account maintenance and charges: Failure to make a minimum deposit of Rs 250 in a year can lead to the deactivation of the account. A deactivated account can then be revived only after paying a penalty of Rs 50 for each defaulted year, along with the missing payments.
• Interest: The interest rate for Q4 2022-23 is 7.60 per cent. The rate is revised every quarter and the new rate will be applicable to the subscriber.
• Other features offered: The scheme has an exempt-exempt-exempt (EEE) model. The account can be opened at any post office in India where banking service is provided or at any branch of an authorised commercial bank. The corpus will continue to earn interest if the account is not closed on maturity
• Tenure: Deposit is to be made for 15 years from the date of account opening. The account will mature 21 years after the date of opening or at the time of marriage of the girl child (after attaining age of 18 years). One withdrawal of up to 50 per cent of the corpus available at the end of preceding FY is allowed for education expenses after the girl turns 18 or passes 10th standard. Premature closure is allowed after five years of account opening on fulfilling conditions like death of account holder, life-threatening disease of account holder or death of the guardian by whom the account is operated.
• Account holding categories: Girl child under 10 years of age through the parents or the legal guardian. The account can be operated by the account holder herself after attaining the age of 18 years.
• Nomination: Not available

Sukanya Samriddhi Yojana age limit: Entry age
The parents or legal guardians of a girl child aged 10 or below can open an SSY account.

Investment objective and risks
The Sukanya Samriddhi Yojana is a special initiative for the girl child and aimed at encouraging saving for the welfare of the girl child. There is no inflation protection in the scheme, though the capital is protected.

Suitability and alternatives

• Suitable for parents of a girl child looking to accumulate money for her over the long-term by investing regularly.
• Not suitable for parents who can assume some risk by investing in equity-linked investments, which can generate much higher returns in the long-run.
• Alternatives can be equity mutual funds/direct stock investment (for those who can assume risk).

Capital protection and inflation protection
The capital in a Sukanya Samriddhi Yojana account is completely protected, as the scheme is backed by the Government of India, making it fully risk-free with guaranteed returns. Since the returns are linked to the government bond yield, there is no assured inflation protection.

Liquidity
The contributions under the SSY cannot be withdrawn before the girl turns 18 or passes the 10th standard. Premature closure is allowed after five years only on fulfilment of stipulated conditions. As of now, there is no loan facility available.

Guarantees
For Q4 2022-23, the deposit will fetch an interest rate of 7.60 per cent. The rates will be revised every quarter and the new rates will be applicable to all the subscribers.

Sukanya Samriddhi Yojana tax benefit: Tax implications
The scheme has the exempt-exempt-exempt (EEE) model, 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. 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 where banking service is provided or at any branch of a commercial bank authorised by the central government to open an account under Sukanya Samriddhi Account Rules, 2019.

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.

Additional information
The depositor can open only one account in the name of one girl child and a maximum of two accounts for two girls. However, the third account can be opened in the case of the birth of twin girls in the second birth, or if the first birth itself results in three girl children.

To view the current rates on the schemes, visit vro.in/s34211