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)

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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

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

  1. if one invests the minimun amount i.e Rs 1000 per anum what will be aprox. net amout payable to Account Holder after successful complelation of 21 years period

    Reply

  4. Hi Shiv,

    Is there any end date to subscribe this scheme? Until when the scheme will be available?

    Thanks
    Dinesh

    Reply

  5. I went to our Siliguri(Darjeeling)head post office qyary for this scheme. But they have no clearly deffination .

    Reply

  6. Hi shiv kukreja sir. …. namaste
    My daughter’s DOB 22 NOV 2003. for sukanya scheme she is eligible or not.
    Please inform me.

    Reply

  7. Its clear by words, parent or guardian of a girl child below 10 but grace of one year can invest and gain benefit of taxes as applicable

    Reply

  9. You have said in previous comments that 1.5lakh per daughter can be invested upto 2 children. Whereas on the other forums I find the cap is of 1.5Lkah per family for 2 daughters.
    I wanted to invest 1.5 for 1daughter and my wife 1.5L for another daughter and we wanted to claim tax deduction individually.

    If you can clarify it would be helpful.

    Reply

  10. Dear all
    Please clear one thing,some told me.
    As per our new p m there is a new offer comes for girl child,where we give only 1000/- per year till 14 years(1000*14=14000/-) and after girl child age cross 21 years,we can rcvd 600000/- rs.
    Is this reality or any fake news.

    Reply

  12. Dear Sir,

    If any unfortunate death occurs for parent/gardian. Then what about the account, whether it will be closed or matures at 21 yrs.

    Reply

    1. Under special circumstances, like death or medical support in life-threatening diseases etc., you can make a request to prematurely close the account and withdraw the amount.

      Reply

  13. Hello Sir,

    Thanks for IMP info., i would also like to know under sukanya plan can we monthly deposit 10k since its difficult to pay 1,20,000 at a time?
    And what will be the final amount to be receive at the age of 21 years?
    Waiting for value adding guide.

    Thanks Seema

    Reply

  15. Hi Shiv,

    My daughter got birth on 4th december–2014, is she eligible for this scheme or not, can i open one account for her.

    Thanks
    Santosh

    Reply

  18. Sir,
    please tel me can we open two accounts for a single girl child, one account is opended by her grand father and another account is opened by father. does it possible.

    Reply

  19. Hi,
    I have a question, now my daughters age is 5yrs and if I start investment now , till when I have to invest, till 14 yrs of my daughter, or till 14 yrs from date of opening the account. Also let me know what if I skip payment for any month.

    Thanks,
    Rajesh

    Reply

    1. Hi Rajesh,
      You will have to invest for 14 yrs from the date of opening this account. Also, it is not a monthly deposit scheme, you need to invest only once in a year in this scheme. If you do not deposit a minimum of Rs. 1,000 in this account in a financial year, then there is a penalty of Rs. 50 for each year you skip to deposit.

      Reply

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