9 Sukanya Samriddhi Yojana Benefits Support India’s Girl Children
Launched by Prime Minister Narendra Modi on 22 January 2015, the Sukanya Samriddhi Yojana (SSY) is a Central government-backed small savings scheme designed to support girl children in India to be economically independent by the time they reach age 18.
The savings from the scheme can go toward education, advancing careers, or even funding marriage if that is required. It was launched as part of the larger Beti Bachao, Beti Padhao (Save a Girl Child, Educate a Girl Child) campaign to improve the gender indices in India.
Parents or legal guardians of girl children can open the Sukanya Samriddhi Yojana account on behalf of their daughters before they turn 10 years of age via designated banks or post offices. Currently, there are 28 banks in India that can offer an SSY account. The tenure of the SSY account is 21 years or until the account holder gets married after she turns 18 years of age. In this blog, we discuss Sukanya Samriddhi Yojana benefits.
Benefits of Sukanya Samridhi Yojana
This is one of the unique schemes offered by the Government of India to support girl children and their families. Here’s a rundown of the Sukanya Samriddhi Yojana benefits:
1. Guaranteed returns
Being a government-backed scheme, the Sukanya Samridhi Yojana offers guaranteed returns. Hence, it is considered to be one of the most secure savings schemes.
2. Competitive interest rates
One of the top benefits of the Sukanya Samriddhi Yojana is the interest rate offered. At a current interest rate of 7.6%, it is considered to be on the higher side compared to other government-backed schemes such as the Public Provident Fund (PPF), fixed deposit tax-saver schemes, post office savings, and national savings certificates.
However, it should be noted that when the scheme was first launched in 2015, the interest rate was 9.1 % and later the rate was revised to 9.2% in March 2015. Since then the interest rates have consequently been lowered.
3. Sukanya Samriddhi Yojana tax benefits for parents
Under Section 80C of the Income Tax Act, the parent/ guardian who invests in an SSY account on behalf of their minor girl can claim a tax benefit of ₹1.5 lakh in a fiscal year. Please note that the Tax Act caps ₹1.5 lakh savings from different investments; hence, if you have other active investments that fall under the coverage of the Act, your tax rebate will be adjusted accordingly.
4. Low minimum deposit
Another excellent Sukanya Samriddhi account benefit is that parents or legal guardians can open the account by making a deposit of as low as ₹250. This makes the scheme relatively inclusive and affordable for parents from diverse income groups.
The aim is to enable as many girl children as possible to leverage the scheme. However, a minimum deposit of ₹250 must be made every year, for 15 years. If not, the account will become inactive and get listed as an “account under default.” The account can be reactivated by paying a fine of ₹50 for each year when the account is in default.
5. Operation of account
The Sukanya Samriddhi Yojana account is to be operated by parents or legal guardians until the girl beneficiary reaches 18 years of age. On attaining the age of 18, the girl beneficiary can also operate the account by herself. The transfer can be done by submitting the necessary documents to the bank or post office, where the account is held.
6. Power of compound interest
Another top benefit of Sukanya Yojana is that it compounds on a monthly and annual basis. The interest at the rate of ₹ 7.6% is calculated every month by the 10th of the month. Hence, investors are advised to deposit the amount before or by the 10th of the month to benefit from the monthly compounding feature.
7. Premature withdrawal for education
Though it is ideal for the account to be active for up to 21 years for it to reach the full maturity amount, there are some cases when premature withdrawal may be necessary.
However, the account still needs to be maintained for at least five years before it can be withdrawn. Once the minimum tenure of 5 years has passed, you can prematurely withdraw money from the SSY account under the following conditions:
- Up to 50% of the balance amount in the account can be prematurely withdrawn when the beneficiary turns 18 years of age or completes standard 10 in school.
- The regulations set by the Department of Posts under the Ministry of Communication determine that withdrawals can happen through a single transaction. Alternatively, it can be done through instalments of one withdrawal per year for up to five years.
- There are some cases where the account creates a financial burden for parents due to a medical emergency or financial crisis. In such cases, a premature withdrawal is allowed after five years of maintaining the account.
- The amount can also be withdrawn if the beneficiary gets married upon attaining the legal age of 18 years. Parents/ guardians, or the beneficiary herself should send a notification of the intent to marry three months in advance. Once the beneficiary is married, the scheme needs to be discontinued.
8. Sukanya Samriddhi Yojana death benefits
In the unfortunate case where the beneficiary passes away, the parent or legal guardian must submit a death certificate, confirming the demise, to the post office or bank where the account is held.
The account can then be closed and the amount withdrawn. The amount includes interest accrued along with the principal amount. Premature withdrawal is also allowed in the case of the death of a guardian or parent, and when the other spouse is unable to make a deposit.
9. No transfer fee
Since the deposits are done via banks or post offices, parents and guardians can get the SSY account transferred to a new branch (of a bank or post office) in case they get a transfer to a new location. This can be done without paying any transfer fee to the current bank or post office where the account is held.
Tax Benefits of the SSY Scheme
Tax savings is a goal of most fiscally responsible consumers. This unique scheme for girl children comes with triple tax benefits (Exempt-Exempt-Exempt or EEE), making it very attractive.
Here is a list of Sukanya Samriddhi Yojana tax benefits for parents or legal guardians who contribute to the scheme:
- The depositor can get a tax deduction of up to ₹1.5 lakhs per financial year under Section 80C of the Income Tax Act.
- The interest earned on the investments is completely tax-free. This is especially attractive since the interest is compounded monthly and annually.
- The lump sum amount received by the beneficiary upon maturity of the scheme after 21 years is also completely tax-free.
As you can see, just like the Public Provident Funds and Employee Provident Fund Organisation schemes, Sukanya Samriddhi Yojana is classified as EEE under the Income Tax Act, making it a completely tax-free instrument at source, investment and interest.
The government introduced the Sukanya Samriddhi Yojana scheme as a vehicle to empower India’s girls. This is especially applicable in a country where gender indices are extremely skewed. This is one of the best savings schemes available because of the multiple Sukanya Samriddhi account benefits, including a competitive tax rate, tax deduction benefit, compounding benefits, and a flexible payment amount.
However, the top Sukanya Samriddhi account benefit is hands-down the exempt-exempt exempt status awarded to the scheme under the Income Tax Act. This means that the interest accrued and the principal amount is not taxable when withdrawn on maturity.
Parents can also consider the savings under the SSY as college funds to support their daughter’s dream of pursuing higher education. Hence, it is advisable for all parents to start investing in the Sukanya Samriddhi Yojana before their daughters turn 10 years old, to make the most of all of its unique features.
FAQs about the benefits of Sukanya Samriddhi Yojana.
Who is eligible to open a Sukanya Samriddhi Yojana account?
The parents of a girl child are eligible to open a Sukanya Samriddhi Yojana account when the beneficiary is less than 10 years of age at the time of account opening. However, not all children have parents. This is why the scheme allows the designated legal guardians to be able to open the account for the minor female beneficiary.
How many SSY accounts can be opened per family?
One family can open up to two Sukanya Samriddhi Yojana accounts, i.e., one for each girl child. However, if the first birth results in female twins or triplets, then the scheme allows the opening of accounts for both twins or triplets. However, in this case, if a third girl or fourth girl is born after twins or triplets, she will not be eligible for the scheme.
What if the parent or legal guardian who makes the annual deposits dies?
The deposits for the Sukanya Samriddhi Yojana account are made every year. If the depositor passes away, the girl beneficiary will receive the principal amount and the interest accrued. Alternatively, the amount can stay in the account until the scheme continues till maturity. It ultimately depends on the financial situation of the beneficiary.
How can you open a Sukanya Samriddhi Yojana account for your daughter?
The parents or legal guardians of a girl child can open a Sukanya Samriddhi Yojana account at any listed bank or post office branch in their locality. They can submit the key documents: birth certificate of the child, filled out Form-1, and PAN or Aadhar of the parent or guardian. Payments can be made via online transfer/NEFT payment, demand draft, cash or cheque.