What is Sukanya Samriddhi Yojana (SSY)

To promote saving for the future of girl children, the government introduced the Sukanya Samriddhi Yojana in 2015 as a part of the Beti Bachao Beti Padhao campaign. It is a fixed income investment that allows users to make consistent payments and collect interest. In addition, Section 80C of the Income Tax Act allows you to deduct up to Section 1.50 lakh from your taxable income for contributions you make to the Sukanya Samriddhi programme.

Overall, the Sukanya Samriddhi Yojana aids in addressing the three major issues:

  • The safety of your girl child's financial future
  • Encompassing tax savings
  • The greater interest rate compared to other similar saving plans

Features of Sukanya Samriddhi Yojana Account

When it comes to financial problems, it is essential to consider how a certain choice will turn out in the long run. As a result, prior to deciding to invest money in a particular investment, it is crucial to understand its characteristics.

  • Eligibility – Any person who has a girl child can opt for Sukanya Samriddhi Yojana after the birth of the girl child but before she turns 10th year in age.
  • Interest rate - The interest rate for the Sukanya Samriddhi Yojana is set by the government every three months. The interest rate is 7.6 percent yearly, calculated, for the quarter ending March 2022. Only at maturity or in the event that your daughter's citizenship or place of residence changes is the interest payable.
  • Lock-in period - The Sukanya Samriddhi Yojana has a lock-in duration of 21 years from the date of opening or till the marriage of the girl. For instance, if the account is started when the girl is 5 years old, it will achieve maturity when she is 26 years of age.
  • Deposits: For 15 years, a minimum deposit of ₹ 250 must be made. The most that may be invested in a fiscal year is ₹ 1.50 lakh. Cash, check, demand draft, or internet transfer are all acceptable payment methods for deposits that are made in multiples of 100. Any amount of deposits may be made during a calendar year. However, your account will be closed if you don't make the required minimum investment in a given year. However, you can reactivate the account by paying the minimum deposit amount and paying the specified nominal penalty.
  • Transfer of accounts: If you move, you can transfer your Sukanya Samriddhi account balance for free to any post office or bank branch nationwide, or from a post office to a bank, if you alter your address. In this situation, you must provide verification of your address. For transfers made in any other situation, there will be a nominal transfer cost.
  • Number of accounts: In a household, a maximum of two accounts may be opened, and only one account may be owned for a single girl kid. If you have triplets (all girls) or if your first child is a girl and you subsequently have twin female infants, you can open more than two accounts.

Eligibility Criteria to Open Sukanya Samriddhi Yojana Account

The requirements to open a Sukanya Samriddhi Yojana Account are simple. They are as follows:

Eligibility Criteria for the Nominee (that is the girl child)

  • This programme only provides benefits to girl children.
  • A grace period of one year is permitted, however the girl child cannot be older than 10 years old. As a result, you can open a bank account for your daughter within a year of her turning ten.
  • You must provide age verification documentation for your daughter.

Eligibility requirements for persons opening and running the account

  • Only if you are your daughter's biological or legal parent or guardian are you eligible to open an account on her behalf.
  • A maximum of two accounts may be opened by each parent or legal guardian.

Tax Benefits of Sukanya Samriddhi Yojana

Investments into Sukanya Samriddhi Scheme are eligible for tax deductions under section 80C. Under the scheme, if you have a girl child below ten years of age, you can put aside some money in the form of a financial gift. The investment would earn similar interest just like PPF, and the wealth created would exclusively help your daughter achieve her financial goals.

Along with EPF, PPF and ELSS, your long-term investments under Sukanya Samriddhi Yojana are eligible for EEE (Exemption- Exemption- Exemption) tax deduction status. As a result, your contribution into the scheme, any interest earned on the investments and the maturity amount, are all safe from taxation. To better understand how the scheme works, let us consider an example. You contributed Rs 1.2 lakh into your daughter’s Sukanya Samriddhi Account during a given financial year.

At the end of the year, you can mention this contribution while filing your tax returns and the amount would get subtracted from your taxable income under Section 80C.

Is Sukanya Samriddhi Yojana interest eligible to taxes?

The interest received on contribution to the Sukanya Samriddhi Yojana is not taxable, hence the answer is no. The investment is classified as exempt-exempt-exempt (EEE).

Conclusion

The government has extended a helping hand in the form of the Sukanya Samriddhi Yojana in order to encourage girl children to save money. In addition to having a sovereign guarantee, the investment qualifies as an EEE, which makes it a desirable investment choice for the needs of your female child. For individuals who need to use the cash sooner, the 21-year lock-in period might be a strong obstacle. The lock-in period for Unit Linked Insurance Plans (ULIPs), which also offers tax savings, is only five years. And the best part is that you might potentially earn double-digit returns on your assets when you invest in ULIPs over the long run.

A part of the money you set aside for your daughter can be invested in the Sukanya Samriddhi Yojana because it is secure and risk-free. To guarantee that you have enough money for your daughter's higher education and marriage despite inflationary pressures, it is a good idea to have a mix of equities in your portfolio.