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Creating a secure financial backup for your child’s bright future, higher education and marriage are among the top priorities of every parent. ‘Sukanya Samriddhi Yojana’ (SSY) run by the Government of India is one of the country’s most popular, safe and highest return small savings schemes for daughters. Opened in post offices or authorized banks, this government account not only guarantees great interest rates but also proves to be a wealth creator worth crores in the long run due to ‘Triple E’ (EEE) tax exemption. If you start a disciplined savings of ₹ 12,500 every month from the time your daughter is born, then after she completes 21 years, she can have a huge corpus of ₹ 70 lakh to more than ₹ 72 lakh.
Sukanya Samriddhi Yojana is a dedicated small savings scheme launched under the ‘Beti Bachao, Beti Padhao’ campaign. Under this scheme, parents or legal guardians can open an account any time from the birth of their daughter till she completes 10 years of age. This account can be opened only for a maximum of two daughters in a family (there is a provision for relaxation under the rules in case of special circumstances like birth of twins or triplets). This account can be opened with a minimum amount of ₹250 and a maximum of ₹1,50,000 (Rs 1.5 lakh) can be deposited in any one financial year. The strongest aspect of this scheme is that the capital deposited, interest earned and the entire amount received on maturity is completely tax-free with 100% sovereign guarantee.
The total tenure of Sukanya Samriddhi Yojana is 21 years, but contributions have to be made only for the first 15 years. The parent does not have to deposit any money in the last 6 years, yet the interest fixed by the government on the total amount deposited in the account keeps being compounded annually.
If you deposit ₹12,500 every month, your annual investment will be ₹1,50,000 (12,500 × 12), which is the maximum annual investment limit of the scheme. Currently the government is offering an attractive annual compound interest rate of 8.2% on this scheme. Assuming an average interest rate of around 8.2%, the total principal amount deposited by you in 15 years will be ₹22,50,000 (₹22.50 lakh). The total interest earned during the 15 year investment and the subsequent 6 year lock-in period works out to be approximately ₹49.32 lakh. Thus, on maturity of 21 years, the total maturity amount in the daughter’s account reaches approximately ₹ 71.82 lakh (approximately ₹ 70 to ₹ 72 lakh).
Interest in Sukanya Samriddhi Yojana is calculated on monthly basis. As per the rules, interest for that month is determined on the minimum balance maintained in the account between the end of the 10th day of the month and the last day of the month and is credited to the account at the end of the financial year. So, if you are depositing an installment of ₹12,500 every month, always ensure that your money is transferred to the account within the 5th to 10th of the month. If you deposit the amount after the 10th, you may have to suffer a loss of interest on that deposit for that month, which adds up to a difference of lakhs of rupees over a compounding period of 21 years.
Financial analysts consider Sukanya Samriddhi Yojana to be the best investment tool because it comes under the ‘EEE’ i.e. Exempt-Exempt-Exempt category under the Income Tax Act. Firstly, tax exemption on principal amount up to ₹1.5 lakh deposited per year can be claimed under Section 80C of the Income Tax Act. Second, there is no tax on the compound interest added to the account every year nor is any TDS deducted. Third and most importantly, after 21 years when the daughter receives the entire maturity amount (approximately ₹71-72 lakh), that entire withdrawal will also attract zero income tax.
Although the total maturity period of the account is 21 years, the government has given special relaxation for partial withdrawal keeping in mind the higher education needs of the daughter. When the daughter completes 18 years of age or passes class 10th, up to 50% of the total balance at the end of the previous financial year can be withdrawn for payment of admission and fees in higher education. This withdrawal can be done in lump sum or in five installments. Apart from this, if the marriage of the daughter is fixed after the age of 18 years, then on the basis of proof of marriage, premature closure of the account is also allowed.
Sukanya Samriddhi account can be easily opened in any head post office or authorized government and private commercial banks (like SBI, PNB, ICICI, HDFC etc.) across the country. If the family shifts to another city or state in the future, this account can be transferred to any post office or other branch of the bank across India without any additional charges. Most banks now also provide the facility to set Standing Instruction (SI) through net banking and mobile app, whereby every month ₹ 12,500 is automatically deducted from the salary account and deposited directly into the daughter’s SSY account and the account never defaults.