Sukanya Samriddhi

Since the annual budget has been announced, we have got many of our clients, friends raising queries on Sukanya Samriddhi Account. So, today we would share with you a brief outline, also add to it a perspective for your goal planning.

Sukanya Samriddhi Account

Features:

1. Investment to be made only for girl child – maximum up to 2 girl child.
2. The daughter’s age limit to start the account is 10 years (completed). For this initial year it is extended up to 11 years of age.
3. The expected minimum investment is Rs1,000 pa and maximum investment is Rs. 1,50,000 pa.
4. Either of the parents can open and operate the account.
5. The account can be opened currently only at Post office and public sector banks. Although, currently only post offices have started the schemes. (Please confirm more details with your nearest public sector bank branch)
6. The interest rate for this investment is announced at the beginning of year for next financial year similar to PPF. The interest fixed for the current year is 9.1% compounded annually.
7. The investment is eligible for deduction under 80C. The interest earned on it and the maturity proceeds are also tax free.
8. The investment tenure is up to the age of 14 years of your daughter’s age.
9. The first withdrawal –allowable maximum 50% (of then value) is possible on completion of 18 years of your daughter’s age. The remaining amount can be withdrawn at daughter’s age of 21 or on her marriage – which ever is earlier.
10. If the amount is not withdrawn at that time, it would continue to earn the interest announced for that year.

 Benefits

1. Additional tax free avenue to save for girl child
2. The interest rate announced would be 75 bps higher than average 10 year government bonds versus 25 bps in PPF.
3. The scheme is designed to meet the expenses for daughter like – higher education and marriage. i.e. 18 years and 21 years.

 Drawbacks

1. Not a feasible investment for taking tax benefit under 80C
2. The corpus collected would be substantial only if account is started for new born girl child. However, the lock in is as high as 21 years.
3. The investment only up to age 14 years makes it unattractive for child currently aged 9 years. Since, only 6 years would be there for contribution versus PPF.

We would thus like to summarize that this investment should be preferred only if you have excess liquidity and you wish to make additional savings for your daughter for long term. In case, you are already operating a PPF account for her, it is preferred to take the equity route now for additional savings.

Note: A basis point(bps) is a unit equal to one hundredth of a percentage point.

Thanks and Regards

Team

Saarthi Financial Planner

Email: saarthifp@gmail.com

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