Key Features of Sukanya Samruddhi Yojana

Introduction

Sukanya Samruddhi Yojana (SSY) is a girl child prosperity scheme under the Government of India (GOI) initiative as a part of the ‘Beti Bachao, Beti Padhao campaign. Like ELSS, PPF, NSC, and Tax Saver FDs, Investments in Sukanya Samruddhi Yojana are eligible for a tax deduction under section 80C.

Sukanya Samruddhi Yojana

Sukanya Samruddhi Yojana (SSY) encourages the parents of the girl child to raise funds for education and marriage expenses. This scheme was launched by Prime Minister Mr. Narendra Modi on 22^nd January 2015. SSY is a government-backed savings scheme targeted at the parents of girl children. The system encourages parents to build a fund for the future education and marriage expenses for their female child. The SSY account can be opened at any India Post office or authorized commercial banks (SBI, ICICI, etc.).

Eligibility

• Sukanya Samruddhi account can be opened only in the name of a girl child by her parents or legal guardians.
• The girl child has to be below the age of 10 at account opening.
•  Multiple Sukanya Samridhhi accounts cannot be opened for a single girl child.
•  Only two SSY accounts are allowed for a family, i.e., one for each child.

Investment Limits

•  On 23 July 2018, the criteria for a minimum annual deposit for the Sukanya Samriddhi Yojana account was revised to Rs.250 from the earlier amount of Rs.1,000.
• The minimum annual contribution to the Sukanya Samriddhi Account (SSA) is Rs.250 and the maximum of Rs.1.50 lakh in a financial year. Therefore, an SSA can be opened with a minimum deposit of Rs.250 and multiples of Rs.100 after that.
• You have to invest at least the minimum amount every year for up to 15 years from the date of account opening. After that, the account will continue to earn interest till maturity.

Rate of Return/ Interest Rate of Sukanya Samriddhi Account

Based on the Government Security (G-sec) yields, the Indian Government decides the rate of interest for the scheme every quarter. The interest rate is compounded every year and is credited to the account. Subscribers can also opt for monthly interest. For a month, the interest rate is calculated on the minimum balance present in the account between the end of the 10th and the last day of the month. The Government has ensured that the Sukanya Samriddhi Account interest rate is lucrative enough for parents to be encouraged to invest more for the future security of the girl child.

The interest rate for 2019-2020 is revised to 8.4% from 8.5% earlier. The rate of interest for the last quarter (1 April 2019 – 30 June 2019) was 8.5%, and it is compounded on an annual basis.

Tax Benefit & Taxability of Income

If you are wondering whether Sukanya Samriddhi Interest is taxable or not then let us tell you that investment in SSY is eligible for tax deduction up to Rs. 1,50,000 under section 80C. This scheme has Exempt-Exempt-Exempt (EEE) Status. It means that interest received on the investment made is not taxable. The investment made is also eligible for the sukanya samriddhi yojana deduction under section 80C up to Rs. 1,50,000. The deduction of Sukanya Samriddhi Yojana is in aggregate). Also, the amount received on maturity (principal and the interest thereon, are exempt from tax.

Other Important Points

A. Opening of the SSY Account

• Sukanya Samriddhi Yojana Account can be opened anytime after the birth of a girl child but before the completion of 10 years of her age. The amount is required to be deposited in the account for 15 years from opening an account. After that, deposits are not allowed; interest will be earned on the balance amount until the maturity/ marriage of the girl child, whichever is earlier. Only one account can be opened for one girl child and a maximum of up to 2 girl children.
• Guardian should submit his identity proof, address proof, and birth certificate of the girl child while opening the account in her name. A girl child can operate the account on attaining 10 years of age.

B. Withdrawal from SSY Account

Once a girl child turns 18, the account holder can withdraw from the SSY account to meet higher education expenses or marriage. Amount of withdrawal shall be restricted to 50% of the balance available on 31st March of the previous year, in SSY Account.

Example: If Mr. Amit wants to withdraw in August 2018 for his daughter’s higher education, he will be eligible to remove 50% of the balance available as of 31st March 2018.

C. Maturity and premature closure of SSY Account

The account will be closed after 21 years from the date of opening or till the date of her marriage.

Example: If Mrs. Sujata Singh opens the Sukanya Samriddhi Yojana Account for her daughter Ms. Neha, a girl child of 8 years. In this case, the account will be operative for 21 years, i.e., till she turns 29 years.

Premature closure of account can be made only after completing 5 years of the account. The account can be closed prematurely in the following cases-

•  Death of guardian
• Deposits causing genuine hardship to the depositor or on the girl child
• Money required for life-threatening diseases

 Maturity proceeds are directly paid to the girl child, giving her financial independence.

Documentation for SSY

1. SSY Account Opening Form
2. Birth Certificate of the girl child (mandatory)
3. Identity proof (as per RBI KYC guidelines)
4. Residence proof (as per RBI KYC guidelines)

Summary

The benefits of Sukanya Samriddhi Yojana are :

1. Sukanya Samriddhi Yojana Under 80C avails tax deduction under section 80C (up to Rs. 1,50,000 every financial year)
2. The rate of interest is slightly high (as compared to other investment options)
3. Partial withdrawal allowed up to 50% (when the girl child turns 18 years)
4. Tenure of 21 years (to make the girl child financially stable)
5. Can be opened at any bank account or post office
6. Tenure to make payment till 14 years of investment, from the date of the first investment
7. Allowed for a maximum of 2 girl child, till the age of 10 years
8. Rs.250 to Rs. 1,50,000 per year can be deposited

For more clarity, please refer to the following video:

Thus, the parent gets a competitive interest rate on the Sukanya Samriddhi Yojana Account, in addition to a tax exemption under Section 80C of the Income Tax Act, 1961. There is no other deposit scheme in the country that offers a high-interest rate, tax exemption, and security for the girl child.

Conclusion

Through this blog, we hope that we were able to throw light on the Sukanya Samriddhi Yojana and clear your all queries of whether interest on Sukanya Samriddhi Yojana is taxable or not.