The Sukanya Samriddhi Yojana (SSY) is a government-backed savings scheme in India that aims to provide financial security for the girl child and promote their education and welfare. It was introduced as part of the "Beti Bachao Beti Padhao" campaign, with a focus on empowering girls and ensuring their bright future. Under this scheme, parents or legal guardians of a girl child can open an account before the child attains 10 years age. The account remains active for 21 years or until the girl child's marriage, whichever is earlier. The funds accumulated in the account can be utilised for her education, marriage, or any other expenses deemed necessary for her well-being.
Since it was launched on January 22, 2015, by the Government of India, The Sukanya Samriddhi Yojana has gained significant popularity across the country due to its numerous benefits, including tax exemptions and high-interest rates. It has proven to be an effective tool for promoting financial inclusion and empowering the girl child in India. From mere 123Cr in the year, deposits have grown to more than 1,40,000Cr by the end of the year 2022.
In the following sections, we will delve deeper into the eligibility criteria, account opening procedure, investment details, tax benefits, and other essential aspects of the Sukanya Samriddhi Yojana.
Eligibility Criteria
Who can open: The account can be open only for Girl child. The account can be opened by the natural or legal guardian of the girl child.
Maximum Entry Age Limit: The account needs to be opened before the girl child turns 10 years old.
Number of Accounts: Only one account can be opened for a girl child under the Sukanya Samriddhi Yojana. In the case of multiple girl children, separate accounts need to be opened for each of them.
Documentation: The guardian or parent is required to provide the necessary documents to establish their identity and relationship with the girl child. This may include identity proofs such as Aadhaar card, PAN card, passport, or any other document specified by the government.
Where to open the account
The Sukanya Samriddhi Yojana account can be opened at various authorized banks and post offices across India. Some of the authorized banks include State Bank of India (SBI), ICICI Bank, Punjab National Bank (PNB), HDFC Bank, and Bank of Baroda (BOB). Post offices across the country, including rural and urban post offices, also offer the facility to open Sukanya Samriddhi accounts.
Deposit and Withdrawal Limits
Minimum Deposit: The minimum deposit amount required to open a Sukanya Samriddhi account is Rs. 250.
Maximum Deposit: The maximum deposit limit for the Sukanya Samriddhi Yojana is Rs. 1.5 lakh per financial year. It's important to note that the deposit amounts can be made in multiple installments or in a lump sum as long as they are within the overall yearly limit.
How many years can be contributed: Contributions to the account are allowed for 15 years. After that, no contributions are allowed . However, the accumulated corpus will continue to earn interest until completion of 21 years from the account opening date.
Maturity : Account matures after completing 21 years since the date of account opening. After completing 21 years from opening of the account, there will not be any interest payable.
Premature closure: Account can be closed before completing 21 years for the purpose of girls marriage provided that the child turns 18 years old.
Partial Withdrawal: Partial withdrawals are allowed after the girl child completes 18 years of age for the purpose of Higher Education for the girl. Maximum of 50% of balance at the end of previous financial year can be partially withdrawn.
Interest rate on Sukanya Samriddhi Yojana Account
There is a misconception that the interest rate on the SSY account is fixed and guaranteed throughout the period. The fact is that, the interest rate on an SSY account is revised every 3 months. The rate is linked to the yield on the benchmark 10 year G-Sec which in turn is linked to RBI repo rate. When the scheme was started in 2015, the interest was 9.2% p.a which was very high in correlation to the then prevailing RBI repo rate. Since then, the interest rates have been continuously revised lower year after year and remain 7.6% for almost the last 3 years between FY2020-FY2023. Recently, the rate has been revised to 8% for Q1 FY2024 after several RBI repo rate hikes.
Following chart shows the long term trend of the SSY interest rates since it's launch.
Returns
Returns on SSY are a function of the interest rate declared by the government. As seen in the above chart, the interest rates have been hovering between 7.6% - 8.5% and currently stand at 8%. If we can assume an average rate of 8% for the entire 21 year period, let's look at how much the maturity value will be. Let’s assume that the maximum permissible amount of 1.5 lakhs is invested every year on April 1st. following chart shows the year wise opening balance, interest earned and closing balance of the Sukanya Samruddi Yojana for 21 years.
As you can see, if someone invests consistently in SSY for 15 years, the maturity amount of almost 70 lakhs is quite good.
Tax benefit
Apart from the added benefit of good returns on the investment, there are several tax benefits which make the investment in the SSY scheme even more compelling.
The principal amount invested is eligible for the tax deduction under section 80c
The entire maturity value (principle and interest earned) is on the investment is also completely tax free under section 10
Summary
In this blog post, we have looked at the Sukanya Samruddi Yojana scheme details in depth.
The SSY scheme has become one of the most popular saving schemes that plays a crucial role in promoting the welfare and financial security of the girl child.
By considering SSY as an investment option, individuals can secure the future of their daughters while enjoying tax benefits and the guarantee of a government scheme.
In the next post, we will look at the children’s gift funds which can be used to save for both girl child as well as boy child. We will compare and contrast how SSY and Children’s gift funds stack each other.
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