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As parents, you want to provide the best of everything to your children. Good education, for starters, can be rather expensive these days. Children’s upbringing, until they are independent, requires advance planning and strategic investing. To encourage parents of girl children to save for their daughter’s education, the government of India launched the Sukanya Samriddhi Yojana (SSY) in 2015. This scheme aims to help parents build a significant corpus for their daughter’s education or marriage. Offering tax benefits, guaranteed returns, and a sovereign guarantee, SSY is among the safest investment options available today. Read on to know more about this scheme and if it can be a good fit for your financial goals.
Launched in 2015 as part of the Indian government’s ‘Beti Bachao, Beti Padhao’ campaign, Sukanya Samriddhi Yojana is a small savings scheme designed to help parents of girl children accumulate a corpus for their daughter’s education and marriage. To invest in the scheme, the parents or guardians can open an account in their daughter’s/ward’s name at a bank or post office offering the scheme.
Parents of a girl child aged 10 years or younger can invest in this scheme. The scheme allows for a minimum and maximum annual deposit of Rs.250 and Rs.1.5 lakh, respectively. Deposits to the account can be made for 15 years from the account opening date. The account, however, has a lock-in period of 21 years, implying that deposits mature after 21 years. If the SSY account holder (girl child) gets married before the end of the 21-year maturity period, the account will be closed and not be operated after her marriage.
To open an SSY account, your daughter must be under 10 years of age. Only one account per girl is permitted, and a family can open a maximum of two accounts. As per the guidelines, “a guardian can open only one account in the name of one girl child and a maximum of two accounts in the name of two different girl children.” However, in case of twin/triplet girls, more than two accounts can be opened.
If you fail to make the minimum annual deposit of Rs.250 in a financial year, your account will be treated as a defaulted account. You can revive such an account by making a minimum payment of Rs.250, along with Rs.50 for each year of default within 15 years of opening the account. According to a Department of Posts circular dated August 21, 2024, accounts opened under the guardianship of grandparents (who are not the legal guardians) will be transferred to the rightful person, such as the natural guardian (living parents) or a legal guardian.
Among fixed income instruments, SSY offers one of the highest interest rates. For the quarter of October-December 2024, SSY offered an annual rate of return of 8.2%. So, if you invest Rs.3,000/month in this scheme for 15 years, you will receive a maturity amount of Rs.1,43,642. This means a total investment of ₹45,000 over 15 years will earn you ₹98,642 in returns.
Withdrawals from SSY are permitted once the girl child turns 18 or completes the 10th standard. However, you can withdraw up to 50% of the account balance at the end of the previous financial year. This can be done either as a lump sum or in yearly instalments for up to five years, based on your actual need for fees or other charges. In specific cases like the account holder’s death, severe health issues, or the guardian’s demise, premature closure will be allowed after five years, on submission of an application and complete documentation.
Like many other government-backed schemes, SSY also falls in the EEE (Exempt-Exempt-Exempt) category under the Income Tax Act. This means the deposits up to Rs.1.5 lakh made to the scheme qualify for tax deductions under Sec 80C. Additionally, the interest earned, and maturity amount are also fully exempt from tax. So, while the investment can lower your taxable income, the stable returns and withdrawal facilities offer flexibility and security, making this a win-win.
For parents looking to build a modest corpus to take care of their daughter’s future needs, SSY is an excellent investment option that comes with low-risk, while offering stable returns and tax benefits. As a result, it is particularly suitable for individuals who prefer to avoid riskier, market-linked options, like mutual funds. While SSY encourages disciplined saving with a clear goal, given the 21-year lock-in period and conditions applicable to partial and full withdrawals, this scheme may not be suitable for everyone. For better returns, consider SSY as a part of your portfolio while diversifying your investments across asset classes like equities for inflation-beating returns.
Adhil Shetty is the CEO of BankBazaar.com
