Sukanya Samriddhi Account is a grand scheme initiated by the Government of India. It started on 22nd January 2015. The program’s primary purpose is to create a corpus to meet the education and marriage expenses of a girl child. It is a part ‘Beti Bachao Beti Padhao’ campaign that advocates to save and educate the girl child. It is common to observe that the parents’ eyes are filled with tears when a new girl child is born in India. They fear a lot of uncertainties, including the financial strain.
Moreover, it is not uncommon to see gender inequality in most parts of India. Further, these practices become more complex and widespread in economically and socially crushed sections. Male children have more choices than their female counterparts. We have to rise above it and make the future of our daughters more colorful and vibrant.
However, we cannot neglect the importance of finance when we think of quality education. Above all, a few small steps taken today can make a drastic change in the future. This scheme can empower our daughters financially, giving them more freedom to pursue higher education and choose their careers. For example, you can accumulate Rs 50,00,000 for your daughter that is also tax-free at your hand if you invest Rs 10,000 per month. Let’s see it in detail.
What Is Sukanya Samriddhi Account Scheme?
The parents or guardian of a girl child should take advantage of this scheme to accumulate a decent amount of money to meet the child’s educational and marriage expenses. Several plans are available in India for the same purpose. However, it is suitable for risk-averse parents. It is also tax-friendly. Further, there are no safety concerns as the Government of India backs the plan.
Who Can Open A Sukanya Samriddhi Account?
The parents or legal guardians of a girl child is eligible to open the account. Further, one can also open the account for an adopted girl child. The plan designates the girl child ‘Account Holder’ and the parent or guardian ‘Depositor.’
However, there is a restriction on the girl child’s age to become eligible to open a Sukanya Samriddhi Account. The maximum entry age is ten years, with no minimum entry age. Thus, it means you can open an SSA even for a newborn girl child. However, you have to produce the child’s birth certificate and identity and address proof of the parent or guardian. Most importantly, you can open an SSA at any commercial bank or post office.
There is also a restriction on the number of accounts per family. You can open one account per child. Further, it is a maximum of two accounts for each family. That means one cannot open more than two accounts. However, there are a few exceptions. For example, you can open more than two accounts under the following conditions.
- The number of children is more than two on the 1st birth
- The number of children is two or more on 2nd birth provided one child on 1st birth
It is important to note here that the depositor has to maintain the account till the account holder attains 18 years. She is eligible to continue the account after that.
Tax-Advantages Under SSA
The SSA falls under the EEE (Exempt, Exempt, Exempt) tax regime. It means your money is exempt from taxes at the time of investment, accumulation, and withdrawal. This feature makes it more attractive to other products like Public Provident Fund (PPF) and National Pension Scheme (NPS). However, we cannot compare SSA with PPF or NPS.
You can claim tax deduction under section 80C of the Income Tax Act for deposits up to Rs 1.5 Lakh rupees in a financial year under the old tax system. But, the new tax system has no such tax benefits under 80C. However, you can choose either the old tax system or the new tax system, w.e.f. 1st April 2020. Therefore, it is wise to talk with your tax consultant before taking a call.
Deposit Limit Per Financial Year
There is also a restriction on the deposit amount in SSA per financial year. For example, The minimum deposit amount you need to maintain the account is Rs 250. Similarly, the maximum limit is Rs 1.5 Lakh rupees. You cannot deposit more than the said amount. However, if you deposit more than Rs 1.5 Lakh in a financial year, that amount will not earn any interest, and you can also withdraw it anytime.
The SSA account will become inactive if you don’t maintain the minimum balance. That is Rs 250 per financial year. However, you can reactivate it anytime during its 15-year term by paying the penalty. You need to pay Rs 50 (Penalty) plus Rs 250 (Min. Deposit) for each year of default. For example, if your account is inactive for two years, then you have to pay Rs 600 [(Rs 50*2) + (250*2)] to reactivate the account. Further, it is interesting to note that you will earn interest on your balance amount till maturity even if you don’t reactivate your account for some reason.
The term of Sukanya Samriddhi Account is 21 years from the day of account opening. However, you have to pay for the first 15 years only. Further, no payments are allowed after 15 years of account opening. However, the accumulated amount will earn interest after 15 years to 21 years. There is a confusion that the scheme matures when the girl child attains 21 years of age. But it is not valid. It is not the age of the girl child but the age of the account.
Further, you can deposit money in the Sukanya Samriddhi Account in cash, cheque, demand draft, or online transfer.
Rate Of Interest On Sukanya Samriddhi Account
The current rate of interest in Sukanya Samriddhi Account is 7.6%. It is the highest rate of interest across banks and post offices. However, it is not fixed. The Government of India changes the rate of interest quarterly. Thus, it can go in any direction from here. However, we can expect a few more rate cuts in the coming quarters as the Corona Virus has shaken the world economy, including India.
The interest is calculated monthly but credited at the end of the financial year. Thus, the compounding frequency is yearly in this case. Moreover, deposits must be made on or before the 5th day of each month to earn interest. Therefore, contributions made after the 5th day will not receive any benefit for that month. However, it will earn interest in the next month.
Maturity Period Of Sukanya Samriddhi Account
Sukanya Samriddhi Account matures 21 years after the date of the account opening. Further, you get 100% of the accumulated corpus at the time of maturity, and the account is closed. However, the account holder needs to submit the identity and address proof at that time.
Sometimes, a girl child marries before the account matures. In such cases, the girl can apply for the account closure and take the corpus. However, she has to produce an age proof. Further, she needs to apply before one month of marriage to 3 months after it. Most importantly, it is not necessary to close the account after the marriage of the girl. She can continue it to harness the power of compounding. However, the accumulated corpus does not earn any interest after 21 years from the date of account opening.
Partial Withdrawal Option
There is also a partial withdrawal option in Sukanya Samriddhi Account. However, it is restricted to the education of the girl child only. You have to submit the admission offer or fee slip issued by the concerned educational institute where your girl child will take admission. The amount you are eligible to withdraw partially is the lowest of the following two factors.
- Actual admission fee to be paid
- 50% outstanding balance at the end of the financial year before the year of withdrawal
Further, you can redeem the amount in a single lump sum or installments. However, one withdrawal is allowed each year for five years only. Thus, the plan’s primary purpose is to discourage the depositors and account holders from redeeming the amount prematurely.
Premature Closure Of The Account
A Sukanya Samriddhi Account can also be closed prematurely but on specific grounds. The conditions are as follows.
- Death of the girl child
- Change in the residential status of the girl (Resident Indian to NRI)
- Extreme difficulty in maintaining the account, e.g., death of the depositors or life-threatening disease to the girl child
However, it cannot be closed on any ground before five years of opening the account.
You can transfer the account in the following manner.
- One post office to another
- One bank to another
- Post office to a bank and vice-versa
However, it is essential to note that the account transfer is free of cost if the girl child’s parents or guardians are shifting from one place to another. In other cases, you have to pay Rs 100 to the bank or post office to move your account.
Other Important Features
- It has nomination facility
- There is no loan facility available
- You receive a passbook once you open an account
- You can apply for a duplicate passbook by paying Rs 50
An Example Of Return Calculation
Let’s assume Mr. X deposits Rs 10,000 per month for his daughter in SSA. Then, what will be the amount of accumulated corpus at the end of the maturity?
It is important to note that the Sukanya Samriddhi Account scheme does not promise you a guaranteed return. It fluctuates from time to time. Its current yield is at 7.6%. If we take the same interest rate for the next 21 years (that may not be feasible), Mr. X will be able to accumulate Rs 51 Lakh at the maturity. However, his total deposited amount will be Rs 18 Lakh only during the 15 years term. It means Rs 33 lakh in the form of interest.
Pros And Cons Of SSA
- Attractive rate of interest
- Tax benefits
- The minimum deposit amount is Rs 250
- Yearly compounding mode
- Only for girl child
- The maximum deposit amount is Rs 1.5 Lakh
- Entry age barrier
- Penalty for non-maintenance
A Closing Thought On Sukanya Samriddhi Account
There are thousands of financial products in the market designed for a girl child. However, it is the best scheme for risk-averse parents. The interest rate and tax-treatment also look attractive. Some people may not like the plan due to its harsh conditions on premature withdrawal and closure. But, it is also an advantage in disguise. This way, parents and guardians of the girl child will not be able to redeem the money for other causes. It is tough to stick with a financial goal and achieve it. However, such stringent plans force us to stay on track.
We cannot ignore the importance of equity for our long term goals. It is more liquid, and the return expectation is also higher. However, it comes with some risk. If you can take the moderate risk, then you can even think about equity. However, there is a type of fund called ‘Hybrid Fund’ that will be more suitable for those who want to take exposure in equity for the first time. You should know that even one percent more return can create magic in the long run. Let’s end the session with a beautiful quote.
“Gender equality is more than a goal in itself. It is a precondition for meeting the challenge of reducing poverty, promoting sustainable development, and building good governance.” – Kofi Annan
I hope I have covered every detail of Sukanya Samriddhi Account. However, you can always send me your queries, and I will try to answer it as soon as possible. Don’t forget to share the post with your loved ones. You can also join our newsletter to receive notifications whenever we publish a new post.
Thanks and regards,