The Government of India launched the Sukanya Samriddhi Yojana (SSY) in 2015 to uplift the welfare of girl children. It is an initiative that allows parents to save for their daughters and receive high returns on their investment.
While considering if a parent should invest in this scheme, it is imperative that they learn all relevant details of this initiative. SSY aims to set up a fund for girl children who can aid their future education as well as marriage expenses. While only one account can be opened for a child, a family can open a maximum of 2 accounts for their girl children, with the exception in case of twins. The government also allows parents of adopted children to open these accounts.
Benefits of this initiative
The benefits provided by this initiative effectively cover all types of expenses that can come up in the future. While options like fixed deposits can be explored to save for a child’s future, a few additional benefits are also offered by SSY.
These advantages are discussed below –
- Savings: Sukanya Samriddhi Yojana launched by the government allows parents to plan for their daughters’ future and save accordingly. Since this account must be initiated at an early age, a lengthy period of investment ensures that the sum saved is considerable, thereby allowing to contribute to the crucial expenditures.
- Exclusive access: The access to these funds is restricted to parents till their daughter turns 18. Once they are of legal age, the account comes under their control, though it can only be accessed for specific reasons or necessities.
- Maturity tenor: The maturity tenor of SSY depends on multiple factors. It can either be 21 years from the time of opening this account or when the child gets married after turning 18.
- Tax benefits: Parents opening such accounts can avail tax exemptions under Section 80C. This section allows an individual to avail up to Rs.1.5 lakh in tax exemption.
- High returns: Currently, Sukanya Samriddhi Yojana offers an 8.5% rate of interest.
Unlike fixed deposit accounts or other savings options, the eligibility criteria for this scheme are more intricate.
These criteria are listed below –
- Must be opened before the girl child turns 10 years old.
- Only parents can open a Sukanya Samriddhi Yojana account in their daughter’s name.
- Minimum of Rs.250 must be deposited every year. The maximum amount can go up to Rs.1.5 lakh.
- The amount must be deposited every month for 15 years from the date of opening this account.
- Partial withdrawal can be made at the age of 18 or completion of standard 10.
- The account can be closed prematurely after 5 years if the child’s parents cannot sustain the monthly deposit.
Unlike the few documents required to open a fixed deposit account, SSY requires multiple documents, which include a birth certificate of the child as well as income proof of the parents. Like parents using an online calculator before opening an SSY account for their daughter, an FD interest calculator can be used to calculate the revenue generated on such deposits. Nevertheless, they are advised to calculate how much their daughter will receive on the basis of their expected deposits.
A major limitation of SSY, along with its unavailability for male children, is that it has the maximum limit of Rs.1.5 lakh. Additionally, the amount of money saved at the end of tenor might be inadequate for both educational and marriage purposes.
Consequently, parents should consider investing in Fixed Deposits offered by NBFCs like Bajaj Finance to save for their children. This is one of the best saving schemes in India, especially since it offers safety and reliability. Additionally, parents can opt for multiple FD accounts. They can invest in a mix of long-term and short-term accounts to grow their investments.
Most importantly, investing in a fixed deposit with a 5-year lock-in period will also enable account holders to save on income tax under Section 80C.
While investing, every parent should use an FD interest calculator to calculate the returns on their investment after maturity. Essentially, it also helps in choosing the best option on offer from different financial institutions.
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at HighlightStory