Sukanya Samriddhi Yojana, the new kid on the block

Chidananda, a manager with a FMCG firm, was blessed with twins — a boy and a girl. In the course of discussions with his friend Harish on the future of the twins, he said that while he was happy with the birth of the boy, he was not so happy with the birth of the daughter.

Harish told Chidananda not to rue the fact about girl children as burden and suggested that Chidananda should open Sukanya Samriddhi scheme in the name of the newborn girl for her future wedding and education expenses besides helping him get substantial tax benefits.

Launched in January 2015, by Prime Minister Narendra Modi as a part of the ‘Beti Bachao, Beti Padhao campaign,’ Sukanya Samridhi Yojana (SSY) aims at encouraging parents to save regularly  for the girl child and build a corpus which could be used for their education and wedding expenses.

The government through this scheme aims at reducing the gender imbalance by offering tax benefits to parents having girl children.

Who is eligible?
Parents and guardians of a resident Indian girl child can open SSY in the name of the girl child anytime between her birth and attaining 10 years of age. 

This means a SSY account cannot be opened in the name of a NRI girl child. Only one account can be opened per child with a maximum of two accounts for two children. A third account is possible if the second delivery happens to be twin girls.
Where to open these accounts?

These accounts can be opened in post offices and banks authorised by the Finance Ministry. Since banks and post offices have branches in remote areas, the government hopes to increase the penetration of the scheme.

What is the maturity of this scheme?
The maturity of the scheme is 21 years from the date of opening of the account or the marriage of the girl child whichever is earlier.

Premature closure and withdrawals are allowed before maturity subject to conditions. Deposits can be made for 15 years (earlier 14 years) from the date of opening of account. However, account will earn interest till maturity.

What is the minimum and maximum amount?
The minimum amount that can be deposited is Rs 1,000 and maximum is Rs 1,50,000 in a financial year. This amount can be deposited either in lump sum or in instalments spread over the entire year.

Are there any tax benefits?
Yes, amounts which are deposited in SSY in a financial year qualify for deduction under section 80C of IT Act subject to the ceiling of Rs 1.5 lakh.

What is the interest rate?
Interest rates are announced by and changes made every quarter by the government. The present interest rate is 8.50% compounded annually.   
Interest is paid on the minimum balance between the 10th and last day of the month. Also, the interest earned under the scheme is exempt from tax. Like PPF this also comes under the exempt exempt exempt category.

What documents are needed for opening of account?

The following documents are required:
Birth certificate of the girl child
ID proof of the parent or guardian
Address proof of parent or guardian
Account opening  form


What happens in the event of death of the girl child?
In the event of the unfortunate death of the girl child, the account will be closed and balance transferred to the parent or guardian of the girl child.

What happens in the event of death of parent or guardian?
In the event of the death of the parent or the guardian, the amount is paid to the family or the girl child.

Or the account is continued with the balance and the balance along with accrued interest is paid to the girl child on maturity.

SSY is one of the best investments available in terms of returns and tax benefits, investors having girl child below 10 years can invest the full Rs 1.50 lakh in the scheme.
  
(The writer is a former banker. He currently teaches at Manipal Academy of Banking, Bengaluru)