Sukanya Samriddhi Yojana: Opinion & Analysis of Experts

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Having a baby girl is an exhilarating feeling and raising her up is yet another. To make this beautiful journey of parenting even more exciting and less worry-some, government has introduced the Sukanya Samriddhi Yojana, which is exclusively for a girl child.

With a view to help you make better investment decisions we have this exclusive article for you with the expert’s take on the scheme and a detailed analysis of it.

But before we get to the opinion, let’s have a brief about the scheme to get a better clarity.

Sukanya Samriddhi Scheme

What is Sukanya Samriddhi Yojana?

Sukanya Samriddhi Yojana was introduced by the government with an intention to help people save money for securing the future of a girl child.

Let’s see what this scheme has to offer,

Sukanya Samriddhi Yojana is a saving scheme wherein any person can open an account for his/her girl child to save some funds for her better future.

  • The account can be opened by any parent who has a baby girl of up to 10 years old.
  • One can invest a minimum of Rs. 1000 to a maximum of Rs. 150000 per year depending upon the affordability and savings of a person.
  • The interest earned on this account is revised every quarterly and is 8% (approx) as compared to the fixed deposits which give an interest rate of 6-7%
  • The account falls under the EEE tax exemption bracket, which means that the investment made, interest earned, and the withdrawal are all exempt from tax. It has been included in the tax deduction allowed under section 80C.

These were some general benefits of the scheme, now let’s have a look at its structure,

  • The account has a withdrawal restriction which restricts premature withdrawal before the girl turns 18. Thus, ensuring that the funds are actually just blocked for the purpose it was opened for in the first place.
  • The account has to be maintained till 21 years from the date of the opening of the account or until the girl turns 21, whichever is earlier.
  • Partial withdrawal can be made on account of the education or marriage of the baby girl but only after she turns 18. But that is restricted to a maximum of 50% of the account balance.
  • A minimum mandatory deposit of Rs. 1000 per year has to be made in order to avoid penalty.
  • It is compulsory to make deposits for at least 14 years from the date of opening of account, after which even if no deposits are made, the account will still continue to earn interest without charging any penalty for non-deposit till the completion of 21 years of the account.
  • Once the girl attains 21 years of age, complete withdrawal is permitted.
  • Only one account can be opened in the name of one girl child and for up to a maximum of 2 girl children.
  • It is a transferable deposit scheme, which means even if the parent relocates they can get the account transferred to the new location.

Analysis of the Sukanya Samriddhi Yojana

So this was pretty much about the scheme, now let’s have a look at the calculations of the scheme, how feasible or lucrative an option it is,

Well let’s assume, a person deposits Rs. 1.5 Lakhs every year for 14 years (since Rs. 1.5 is the maximum amount that can be deposited and deposit is mandatory for 14 years). 1.5 Lakhs deposited for 14 years assuming average interest of 8.3% comes out to 70.70 Lakhs.

Taking a look at the numbers, the proposition seems to be quite lucrative.

The other aspect that can be looked into might be the lock-in period. Yes, at first the lock-in-period seems quite long and also there is a withdrawal restriction, and investing in other funds may give you the flexibility of early withdrawal.

But then there is another perspective to it, having the flexibility of early withdrawal may make one use the money for purposes other than your child’s future. Having a clearly demarcated fund with a restriction to use to for your child only, ensures that you don’t end up spending it somewhere else and only on the purpose that it was created for in the first place, i.e. your child’s future.

Expert’s Opinion

This is what some of the experts in the financial field have to say about the Sukanya Samriddhi Scheme

Manish Chauhan- from Jagoinvestor

Manish“It would be wrong to give a label of “Bad” or “Good” to SSY  product as such, because for one class of people it would be good, but for another class its like a useless product. SSY is nothing but a mirror copy of PPF customized for those who want to invest on daughter name for long term.

For lower section of society, who are anyways not going to invest in advanced products like mutual funds over long term and looking for a safe option, SSY is a very good choice, as they will get a good interest rate (higher than PPF) and it’s also locked for very long without the facility of early withdrawal, so in a way , a dedicated corpus will get generated for the daughter which can be used for her education or marriage etc, as this also given 80C benefits, more and more people will be inclined to invest in this. Also as it is specifically for Girl future, many people will be able to mentally dedicate some investment for her which is not possible with other products.

But coming to investors at higher section, I think there are better options available like mutual funds or index funds which are the equity based products and should be ideally used for any goal which is 10+ yrs ahead.”

Mr. Pattu from Freefincal.com

Although SSY has 0.5% extra interest than the PPF and is also tax exempt at all stages (EEE), it suffers from one drawback. Only 50% of the accumulated corpus can be withdrawn upon the girl passing 10th or attaining 18 years of age.

Withdrawal will require proof of admission. It is not clear if this refers to admission to a polytechnic/diploma or 11th standard. Even if it is 11th standard, you will have access to half the corpus when the child is about to enter college.

On the other hand, PPF if opened early can be set to mature (so that full corpus can be used) by the time the girl is ready for college.Therefore, bet PPF and SSY, the former is superior. The extra 0.5% return p.a. has a cost in terms of reduced liquidity. 

Since college and marriage expenses suffer from an inflation of at least 10% p.a. these fixed income instruments can only form part of a diversified portfolio. One requires equity to be able to combat inflation. SSY is meant for lower income groups to dissuade marrying off minor girls. 

Shiv Kukreja from onemint.com

Shiv KukrejaSukanya Samridhi Yojana earning 8.3% is a good tax-free assured returns scheme. Thanks to our government’s political compulsions, this scheme gets a special treatment as far as its returns are concerned, and also the tax treatment​

As most child plans offered by banks are ULIPs ​which are market linked, I therefore do not recommend ULIPs for debt investments. Moreover, they also carry very high agency commissions​ and other expenses. Most importantly, one should never buy insurance policies from an investment perspective.

Opening a Sukanya Samriddhi Yojana Account

Sukanya Samriddhi Yojana account can be opened across all the post offices and banks.

Post offices have a PAN India presence with branches all across the nation in the rural and urban areas. Having a wide presence in the rural areas give the post offices leverage and in turn help the government to spread the benefits of the scheme to the masses.

If you have a girl child under the age of 10 years, find a bank or post office and ask for the scheme. Submit all the required documents wherein the birth certificate of the girl child is mandatory in opening the account. Upon submission of required documents there will be a background check after which the account shall be opened.

It can be opened only by the parents of the girl child.

Premature closure of Sukanya Samriddhi Account

Premature closure of Sukanya Samriddhi Account can be done before the expiry of the mandatory 21 years in exceptional cases:

  • In case of death of the girl child

Due to any unfortunate circumstance if the girl child dies, the account can be closed before the expiry of the complete term. Upon submission of death certificate the account can be closed and the deposit amount can be withdrawn prematurely by the parents.

  • In case of medical emergency

If there is any medical emergency wherein it becomes almost impossible for the parent to maintain the account, the account can be closed before the expiry of the term. But the permission for the same has to be received from the government. Once the permission is granted the money deposited in the account can be withdrawn prematurely.

  • In case of death of contributors

If the parents or the guardian who are the prime contributors of the account due to any unfortunate incident die, then in that case the account can be prematurely closed and the deposit amount along with the interest earned will be given to the girl or her family.

  • Any other case

In any other case except the aforementioned, the account will not be closed and it will continue to be active until maturity. Upon maturity the girl will receive entire deposit along with interest.

The mode of deposit in Sukanya Samriddhi Yojana

Deposits can be made in the account either by cash or cheque at the option of the parent opening the account. An endorsement of the cheque has to be made in the favour of the account holder, i.e. the girl child indicating the name of the girl child and the account number.

Deposit can also be made through electronic means i.e. the e-transfers provided that the concerned bank or the post office offers the facility of electronic transfer.

Opening both Sukanya Samriddhi Yojana account and PPF

Currently, only one Sukanya Samriddhi Yojana account can be opened for one girl child,up to a maximum of two girl children in total.

However, there is no restriction on opening any other account on her name. So, if one wants to open a PPF account on the name of the girl child along with the Sukanya Samriddhi Yojana account, both can be simultaneously maintained.

The difference between the two is the intention of saving. While Sukanya Samriddhi Yojana account is for supporting the financial status of the girl child the other one i.e. the PPF account is to help people save for retirement.

Maintenance of the account

The tenure of the account is 21 years from the date of opening of account, however deposits have to be made till 14 years from the date of opening of account. It is mandatory to deposit at least Rs.1000 every year for active operation of the account.

For instance, say the girl child is 10 years old and the account was opened on her 10th birthday. So the deposits have to be made until she turns 24 years old. And the account will mature when she will turn 31 years old.

Every year a minimum deposit of Rs. 1000 has to be made which can be partially withdrawn up to 50% after she attains the age of 18. In our example it means after 8 years of opening the account.

Once she attains the age of 21 years, it is at the option of the account holder whether she wants to keep the account active till maturity i.e. till she turns 31 or she can also choose make complete withdrawal at any time after she has turned 21.

If she chooses to withdraw at the age of say 22, the account will be closed after giving her the complete deposit amount along with interest at approximately 8.3%(current interest rate), which is completely tax free.

However, if she chooses not to close the account then she or the parent has to keep depositing the minimum amount of Rs. 1000 every year till she is 24, (since deposit is mandatory till 14 years from the date of opening of account) and then the account will continue to earn interest till the maturity of the account i.e. when she reaches the age of 31.

Other Relevant Points regarding Sukanya Samriddhi Yojana

Loan against Sukanya Samriddhi Yojana Deposit

Many banks provide loan against various deposits such as Public Provident Fund or Fixed Deposit. But in the case of Sujanya Samriddhi Yojana deposit, banks do not provide a loan against its deposit.

Lump sum investment in the scheme

The account gives you the flexibility to either invest monthly or deposit a lump sum amount at any time of the year.

Interest Calculation on the Sukanya Samriddhi Scheme?

The interest rate for the scheme is on yearly basis. It is calculated every month on the lowest balance before the 5th of every month. Therefore it is advisable to deposit a lump sum amount so that you can earn maximum interest throughout the year.

Opening the account for an NRI girl child

The scheme does not permit opening the account for an NRI girl child. If the account was opened for a girl child while she was an Indian resident but later on acquires an NRI status because of moving out of the country to abroad then the account shall cease and no interest can be earned from thereon.

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and loves to help people with their Tax Queries.