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Every parent dreams that their child’s higher education, career start and other future needs are fulfilled without any financial constraints. In today’s time, amidst the fluctuations of the stock market and the risks of mutual funds, the demand for government schemes that provide safe and guaranteed returns has increased rapidly. The Indian Postal Department, i.e. India Post, through its wide network, is laying a strong foundation of financial security in the name of children in every corner of the country. From GPO Hazratganj in Lucknow, the capital of Uttar Pradesh, to the remote rural areas of the country, small savings schemes of the post office have become another name of trust for common families. The process of opening a savings account in the name of children in the post office is not only extremely transparent, but being backed by the Government of India, every penny deposited in it comes with a sovereign guarantee. The biggest feature of these accounts started in the name of minor children is that they can be started with a small amount and over a long period, a large fund is created with the power of compound interest. Parents can choose the right plan according to their financial capacity, child’s age and future goals.
If you have a daughter up to 10 years of age in your house, then Sukanya Samriddhi Yojana (SSY) of the post office is the best and popular investment option. This scheme, launched under the ‘Beti Bachao, Beti Padhao’ campaign of the Central Government, offers the highest interest rate among all the small savings schemes of the post office. Under this scheme, the account can be opened from the birth of the girl child till she completes 10 years of age. In a financial year, one is allowed to deposit a minimum of Rs 250 and a maximum of Rs 1.50 lakh. Money has to be deposited regularly for 15 years from the date of account opening, whereas the account matures in 21 years. At present, annual interest at the rate of 8.2 percent is being given on Sukanya Samriddhi Yojana. The most attractive aspect of this scheme is its EEE status, which means that the amount invested is exempted from income tax under Section 80C, the interest received is completely tax-free and the entire fund received on maturity also remains exempt from tax. When the daughter turns 18 or has passed 10th class, she is also legally allowed to withdraw up to 50 per cent of the total balance in the account for her higher education expenses.
For those families who have a son or who want to create a solid fund for their child for a long period of 15 years, Public Provident Fund i.e. PPF is the most reliable medium. PPF account can be opened in the name of a minor child of any age by his parent or legal guardian. A minimum of Rs 500 is required to start this account and a maximum of Rs 1.50 lakh can be deposited in a financial year. An important rule to keep in mind here is that the total annual deposit in the parent’s own PPF account and the child’s PPF account together should not exceed Rs 1.50 lakh. Currently, interest is being given on PPF at the rate of 7.1 percent, which is calculated on annual compound basis. Like Sukanya Yojana, PPF is also a completely tax-free (EEE) scheme, that is, there is no income tax on the returns received in it. This account remains locked-in for 15 years, but partial withdrawal and loan facilities are also provided in special circumstances like medical emergency of the child or higher education after 5 years. After completion of 15 years, there is also an option to extend this account in blocks of five years.
For middle-class families who cannot afford to invest a large lump sum, the Post Office’s 5-year National Savings Recurring Deposit (RD) is a great scheme. A fixed amount has to be deposited every month in the RD account, the minimum limit of which is only Rs 100 per month and there is no limit on maximum investment. The government is giving quarterly compound interest of 6.7 percent on this scheme. If the child is 10 years of age or above, he can operate this RD account in his own name, thereby developing financial literacy and the habit of saving in him since childhood. Apart from this, Post Office Savings Account can also be opened in the name of children for Rs 500, which gives 4.0 percent annual interest. In this, children are also given the facility of check book and ATM card as per the prescribed rules, so that they can learn their everyday pocket money management practically.
If your child has received a lump sum cash gift on birthdays, festivals or from relatives, it makes more sense to invest it in post office fixed income schemes rather than keeping it idle in a savings account. National Savings Certificate i.e. NSC comes for a period of 5 years, in which investment can be started with a minimum of Rs 1,000 and there is no maximum limit. An attractive interest of 7.7 percent is available on NSC and the amount deposited in it also gets tax exemption under Section 80C. The second option is Kisan Vikas Patra (KVP), on which interest is given at the rate of 7.5 percent. The specialty of KVP is that this scheme directly doubles your investment in approximately 115 months. Apart from this, Post Office Time Deposit (TD), which works like fixed deposits of banks, is available for a period of 1 year to 5 years. It offers interest ranging from 6.9 percent to 7.5 percent, which also includes the additional benefit of income tax exemption on 5-year time deposits. All these lump sum schemes can be easily availed by parents in the name of children.
The process of opening an account for a minor child in the post office is very simple and easy. For this, the birth certificate of the child is mainly mandatory, so that his correct age can be verified. Along with this, proof of identity and address of the guardian, such as Aadhaar card, PAN card and residence certificate is required. Passport size photographs of both parents and child are to be attached with the application form. Until the child turns 18, the entire legal operation of the account takes place with the signature of the guardian. As soon as the child completes the age of 18 years and becomes an adult, the account is handed over to his/her direct possession by submitting a new KYC form and personal signature of the child at the post office. In this way, these government schemes of post office are proving to be the surest medium to give financial wings to the dreams of children with secure returns, excellent interest and tax savings.