Sukanya Samriddhi Yojana – Tax-Free Small Savings Scheme for a Girl Child

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

“Beti Bachao, Beti Padhao” is the mantra with which Prime Minister Narendra Modi launched Sukanya Samriddhi Yojana on January 22nd this year. Later on, the government issued a notification to allow 80C exemption equal to the amount invested in the scheme up to Rs. 1,50,000, which is also the maximum amount one can invest in this scheme in a financial year.

Now, the Finance Minister in his budget speech has proposed to make the interest component as well as the maturity proceeds as tax-free. I think this proposal has made this scheme to be the best small savings scheme available to the Indian investors. Yes, even better than our golden scheme of Public Provident Fund (PPF). So, what is this scheme all about? Let’s check.

Sukanya Samriddhi Yojana is a small savings scheme which can be opened by the parents or a legal guardian of a girl child in any post office or authorised branches of some of the commercial banks. The girl child is called the “Account Holder” and the guardian is called the “Depositor” in this scheme.

Before I compare this scheme with PPF, let us first check the important features of this scheme.

Salient Features of Sukanya Samriddhi Yojana

Who can open this account? – Parents or a legal guardian of a girl child who is 10 years of age or younger than that, can open this account in the name of the child. For initial operations of the scheme, one year grace period has been provided to make it 11 years of age. With this one year grace period in age, which is valid up to December 1, 2015, you can get this account opened for a girl child who is born between December 2, 2003 and December 1, 2004.

9.1% Tax-Free Rate of Interest – This scheme has been flagged off with a 9.1% rate of interest, higher than that of PPF which stands at 8.7%. But, this rate is not fixed at 9.1% for the whole tenure and is subject to a revision every financial year like all other small savings schemes, including PPF.

Prior to the budget announcement, 9.1% annual return seemed unattractive, but not anymore, as it has been made tax exempt now. Interest amount gets added to your balance amount in the account and compounded either monthly or annually, as per your choice. Monthly interest compounding will be done only on your balance amount on completed thousands.

Duration of the Scheme – The scheme will mature on completion of 21 years from the date of opening of the account. If the account is not closed on maturity after 21 years, the balance amount will continue to earn interest as specified for the scheme every year. In case the marriage of your daughter takes place before the maturity date i.e. completion of 21 years, the operation of this account will not be permitted beyond the date of her marriage and no interest will be payable beyond the date of marriage.

Deposit for 14 years only – Though the scheme has a duration of 21 years, you are required to make contributions only for the first 14 years, after which you need not deposit any further amount and your account will keep earning the interest rate applicable for the remaining 7 years.  

Premature Closure – The account can also be closed prematurely as your daughter completes 18 years of age provided she gets married before the withdrawal. As the maximum permissible age of the girl child is set as 10 years, the scheme effectively carries a minimum duration of 8 years i.e. 18 years of exit age – 10 years of entry age.

Partial Withdrawal – It is also allowed to withdraw 50% of the balance standing at the end of the preceding financial year, but only after your daughter attains the age of 18 years. So, effectively it has a complete lock-in period of at least 8 years, before which you cannot take out any money for any purposes.

Minimum/Maximum Investment – You need to deposit a minimum of Rs. 1,000 in a financial year to keep your account active. Failure to do so will make your account inactive and it could be revived only after paying a penalty of Rs. 50 along with the minimum amount required to be deposited for that year, which currently stands at Rs. 1,000.

Also, you can invest a maximum of up to Rs. 1,50,000 in a financial year. You can make your contribution to this account in as many number of times as you like.

How many accounts can be opened? – You can open only one account in the name of one girl child and a maximum of two accounts in the name of two different children. However, you can open three accounts if you are blessed with twin girls on the second occasion or if the first birth itself results into three girl children.

Nomination Facility – Nomination facility is not available in this scheme. In an unfortunate event of the death of the girl child, the account will be closed immediately and the balance will be paid to the guardian of the account holder.

Documents Required – Birth Certificate of the girl child, along with the identity proof and residence proof of the guardian, are the mandatory documents required to open an account under this scheme. You can approach any post office or authorised branches of some of the commercial banks to get this account opened.

Sukanya Samriddhi Yojana vs. Public Provident Fund (PPF)

Picture1

Budget 2015 has made this scheme quite attractive for the investors. If you’ve already exhausted your PPF deposit limit, want to save for your girl child’s marriage or higher education and have spare money to invest in this scheme, then this scheme provides you one more excellent avenue of safe investment with high returns. You can wait for the next financial year’s rate of interest to get announced anytime this month, if it remains higher than PPF, just go for it.

Application Form to open a Sukanya Samriddhi Account

List of authorised commercial banks where you can get this account opened

876 thoughts on “Sukanya Samriddhi Yojana – Tax-Free Small Savings Scheme for a Girl Child”

  1. can we deposit Rs.150000/- each in both accounts (i.e Rs.300000/-).PPF & Sukanya -Samriddhi account, we know that only 150000/- will be allowed
    under 80C, but if we deposited 150000/-each (300000/-) shall we get benefit of Tax free Interest and maturity amount in both the acounts.
    please clarify correct position.

    1. Yes, you’ll get tax-free interest and maturity amount in both the accounts. In fact, the maturity proceeds in Sukanya Samriddhi Account will be given to the girl child and it will be tax-free for her.

  2. My only daughter born on 26th of oct 2003. Is thre any option to open an account for her. Pl let me know as esrlier as possible.

  3. “you can get this account opened for a girl child who is born between December 2, 2003 and December 1, 2004.”
    As it is quoted so what about the girl who born after these two years. Please clarify.

    1. The quoted line has been mentioned in the context of one year grace period. Otherwise, the scheme is open for all girl children of less than 10 years of age.

  4. Dear sir
    When this scheme will be start? Our post office told the scheme is not start yet. plz give mi all details

    1. Dear Mohammad,
      This scheme got announced in July 2014, notified in January 2015, got 80C exemption in February and got announced as tax-free in the budget. If even after such a long time the scheme has not started, then when can anybody expect the scheme to get started. Nithya mentioned in her comment above that her father-in-law got an account opened sometime back which means that this scheme is already active.

  5. i wants to invest for my daughter.. but already my father-in-law opened in her name in some other state. is it possible for me to open again in her name in some other branch?

    1. Hi,
      You cannot open two accounts in a single name. However, you can transfer your account from one city to another city and from one post office/bank branch to another post office/bank branch.

  6. as per above statement “If you’ve already exhausted your PPF deposit limit,want to save for your girl child’s marriage
    or higher education and have spare money
    to invest in this scheme, then this scheme
    provides you one more excellent avenue of
    safe investment with high returns.”…..does it mean a person can invest 1.5 lkh on his ppf account and 1.5 lkh on girl account , with total investment of 3.0 lks and with intrest as tax free.

  7. Hi Sir,
    Its mentioned as 9.1% annum but when we checked the table the interest amount shows as 592 instead of 1092 the first year. Could you please explain the calculation part.
    Thank You

  8. can I open Sukanya Samriddhi Yojana account in the name of my grand daughter who is holder of OCI status

    1. Clarity is still required as far as NRI/OCI investment is concerned. So, you’ll have to wait some more time for your investment. As NRI investment is not allowed in PPF, I am assuming that the government will not allow it for this scheme as well.

  9. With all respect, I understand a scheme is required for girl’s child marriage. But in my mind, education is the higher priority. Is there a similar scheme for girl’s /boy’s education? Especially the cost of higher education is sky high now and it is growing more than the actual rate of inflation. Hope we get a scheme for education as well.

    1. 50% of the corpus could be used for any purpose as a girl child attains 18 years of age. So, this amount could well be used for higher education. Expecting so many schemes from government for different purposes is like asking for too much.

  10. Respest girls and save girl child jai hind….and I want to say our government that most of the poor people don’t knw about this scheme … bt this type of scheme should advertise in media so people can knw about this scheme… our government provide many scheme bt poor people didn’t get all this.. so hope people get information about this scheme…

    1. This scheme has got all the ingredients to get the required popularity on its own and you’ll definitely have many takers for this scheme. Though I think the government is not required to market this scheme, I am confident that the government will surely play its role to give this scheme its due credit and poor people will get its benefits.

  11. unfortunately parent death then what is next ,family not able to paid annual amount.account is closed or running still girl at age of 18yrs

  12. Any clarity yet on which are the banks mandated to open the Sukanya Samridhi account? I visited SBI today to enquire and they aren’t yet opening the account.

    Further, the grace period of 1 year is available right upto 1 Dec 2015 correct? for children born on on after 2 Dec 2003 which is 11 years as on the date of announcement of the scheme which is 2 Dec 2014. Is my understanding correct?

    Which means that for a child born on say, 17 Jan 2004, I can still open the account even on 1 Dec 2015 even though she may be well beyond 11 years. Is that correct?

    Thanks,

    1. Hi,
      I am working on one more post having the list of banks where you can open this account. The post will also have the application form and the circular of this scheme.

      The language of the circular suggests that this account can be opened in the name of a girl child who is born on or after December 2, 2013, irrespective of her age whether she is below 10, 11 or even 11+. Further clarity will be provided by the finance ministry.

  13. Who gets the proceeds of this account when the girl turns 21? is the parent or the girl child? Any clarity on this issue?

  14. Definitely a great scheme aimed at the Girl Child. Govt should work to make all sections of society aware of it.In lower sections we see people making gambles on chit funds for their girl child’s future, this is a good and safe alternative.

  15. The best part of this scheme is that this is also a EEE scheme. Means one can invest in this scheme without worrying about future taxation. But interest rate could be a worry, whether the high interest rate will be able to sustain for long term or not.
    I have visited Post office and few banks recently to know where exactly they are aware about Sukanya Samriddhi Scheme. The fact is only post-office is allowing to open this account. Banks don’t have much clarity about this scheme. Anyway this is beginning, we will see many changes in coming days.
    Could be another biggest hit Govt scheme like PPF in coming years.

    1. I agree with you Santanu, this scheme has the potential of becoming another popular scheme like PPF. I think the government will try to keep its interest rate equal to that of PPF. I think the government will also try to keep its real rate of interest above 2%, over and above the rate of inflation.

  16. thanks for sharing this information.
    I am just wondering if govt. is keeping money between 14-21 years, not it would fetch less money than combination of RD(0-14years)+FD(14-21 years).
    also there will be no strings like male child, infinite renewals ( 5 years terms).would be great if you can just compare with RD +FD combination in the light of tax implications.thanks.

    1. Thanks Omprakash!
      No, the government is not keeping your money between 14-21 years for free. It is going to pay interest for these 7 years as well. No combination in fixed income investments can yield better than this Exempt-Exempt-Exempt (EEE) investment. This is the best guaranteed fixed income investment available right now.

Leave a Reply

Your email address will not be published. Required fields are marked *