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Category: Investment Management

SUKANYA SAMRIDDHI SCHEME FOR THE GIRL CHILD

SUKANYA SAMRIDDHI SCHEME FOR THE GIRL CHILD  
     
Premature Withdrawal Tax Benefit Maturity
In case of pre mature withdrawal balance amount earns no interest. Pre mature withdrawal amount can be only used for the purpose of higher education or marriage. Any amount that would be deposited in Sukanya Samriddhi Account would be exempted from tax under 80C of IT Act, 1961, till a maximum of Rs 1.5 lakh.  The interest and maturity amount on this account is also exempted from income tax. Also the amount matured at the time to account closure would be completely tax free. 21 years from the date of opening the account or if the girl get married before completion of such 21 years.

 

Comparitive Analysis of PPF and Sukanya Samriddhi Scheme  
     
Details Public Provident Fund Sukanya Samriddhi Scheme
Who can open the account? Any Indian Citizen can open Provident Fund account. Sukanya Samriddhi a/c can be opened on a girl child’s name by her natural (biological) parents or legal guardian.
Age Limit There is no age limit. SSA can be opened in the name of a girl child from the birth of the girl child till she attains the age of 10 years.
Where can the account be opened? You can open PF account in post offices, nationalized banks (like SBI, PNB etc). You can even open PF account in Private banks like ICICI bank. You can operate the account online. As of now you can open it in authorized commercial bank branches and Post offices. Online facility is not available.
Documents required Account opening form (Form A), Nomination form, Passport size photo, Pan card copy, ID proof & address proof (as per Bank/post office KYC norms). Account opening application form, girl child’s birth certificate, Depositor’s (Guardian/parent) address & ID proofs.
Min deposit Rs. 500 Rs. 1,000
Can multiple accounts be opened? Only one PPF account is allowed. A depositor may open and operate only one account in the name of same girl child under this scheme. There is one exception to this rule. The natural or legal guardian can open two or three accounts if twin girls are born as second birth or triplets are born in the first birth itself.
How many times deposit can be made in FY? 12 deposits in one FY. The minimum initial contribution in any financial year is Rs 1000. Thereafter the contributions can be in multiples of one hundred rupees. You can deposit 1,490 times.
Max total deposit allowed in FY You are not allowed to deposit more than Rs 1.5 Lakh in a FY. Same as in PPF.
Return 8.70% 9.10%
No. Of Years contribution is allowed? The minimum tenure is 15 years. Thereafter you can extend the PPF account tenure in block of 5 years. You can deposit till 14 years from the date of opening the account.
Maturity tenure after 15 years (provided the account is renewed or extended). The account will mature after 21 years from the date of account opening (or) on marriage, whichever is earlier.
Partial withdrawal allowed? partial withdrawal is allowed from 6th year onwards.  50% of the accumulated fund can be withdrawn when girl attains 18 years of age.
Withdrawal allowed 50% of the balance  50% of the accumulated fund can be withdrawn when girl attains 18 years of age.
Penalty charges in case of no contribution Rs 50 is charged as penalty. If minimum (Rs 1000 pa) amount is not deposited, the account will be treated as an irregular account. This can be regularized on payment of Rs 50 per year as penalty.
Tax Benefits on contribution Yearly contributions of upto Rs 1.5 Lakh can be shown as tax deduction under Section 80c. Same as in PPF.
Tax Benefits on interest amount earned Interest amount earned on PPF account is exempted from income tax. The interest amount is exempted from income tax.
Tax Benefits on maturity amount It is treated as tax free money. The maturity amount will be treated as ‘tax free’ and exempted from income tax.

 

Example of investment in Sukanya Samriddhi Scheme vs PPF          
                 
We will consider a case when the child is 3 years old when investments begin.  PPF will mature when the child turns 18 (and before she enters college)

This comparison cannot be made for an older child since PPF will mature later and SSY is not liquid. The results will not change by much for a child which is younger.

    
                 
Please note all the numbers have been rounded off to nearest thousand.          
                 
PPF                
                 
Tenure 15 years              
Investment made 15 years              
Return 8.70%              
Maturity amount               2,738,000              
                 
Amount deposited is a fixed amount of Rs 50000 per annum        
                 
                 
Year Opening Balance Amount Deposited Interest Earned Closing Balance        
1                               –                           50,000                          4,350                    54,350        
2                     54,350                           50,000                          9,078                 113,428        
3                   113,428                           50,000                       14,218                 177,647        
4                   177,647                           50,000                       19,805                 247,452        
5                   247,452                           50,000                       25,878                 323,330        
6                   323,330                           50,000                       32,480                 405,810        
7                   405,810                           50,000                       39,655                 495,466        
8                   495,466                           50,000                       47,456                 592,921        
9                   592,921                           50,000                       55,934                 698,855        
10                   698,855                           50,000                       65,150                 814,006        
11                   814,006                           50,000                       75,168                 939,174        
12                   939,174                           50,000                       86,058              1,075,232        
13               1,075,232                           50,000                       97,895              1,223,127        
14               1,223,127                           50,000                     110,762              1,383,889        
15               1,383,889                           50,000                     124,748              1,558,638        
                 
Sukanya Samridhhi Scheme                
                 
Investments can be made for 14 years only (15th-year full investment in equity only)        
50% of closing balance after the child turns 18 can be withdrawn each year.          
Return 9.2%                
Amount available at age 18:  13,19,691 (13.19 Lakhs). After this 50% of the closing balance can be withdrawn up to age 24 when the account will be closed.
                 
Amount deposited is Rs 50000 per annum        
Interest is earned at 9.20% PA.
Interest earned= (opening balance+amount deposited) * 9.20%
(Interest earned is rounded off to nearest thousand)		          
                 
Year Opening Balance Amount Deposited Interest Earned Closing Balance Withdrawal Age of child at closing balance    
1                               –                           50,000                          4,600                    54,600                     – 4    
2                     54,600                           50,000                          9,623                 114,223                     – 5    
3                   114,223                           50,000                       15,109                 179,332                     – 6    
4                   179,332                           50,000                       21,099                 250,430                     – 7    
5                   250,430                           50,000                       27,640                 328,070                     – 8    
6                   328,070                           50,000                       34,782                 412,852                     – 9    
7                   412,852                           50,000                       42,582                 505,435                     – 10    
8                   505,435                           50,000                       51,100                 606,535                     – 11    
9                   606,535                           50,000                       60,401                 716,936                     – 12    
10                   716,936                           50,000                       70,558                 837,494                     – 13    
11                   837,494                           50,000                       81,649                 969,143                     – 14    
12                   969,143                           50,000                       93,761              1,112,905                     – 15    
13               1,112,905                           50,000                     106,987              1,269,892                     – 16    
14               1,269,892                           50,000                     121,430              1,441,322                     – 17    
15               1,441,322                           50,000                     137,202              1,628,523         814,262 18    
16                   814,262                                    –                       74,912                 889,174         444,587 19    
17                   444,587                                    –                       40,902                 485,489         242,744 20    
18                   242,744                                    –                       22,332                 265,077         132,538 21    
19                   132,538                                    –                       12,194                 144,732            72,366 22    
20                     72,366                                    –                          6,658                    79,024            39,512 23    
21                     39,512                                    –                          3,635                    43,147            21,573 24    
                 
Therefore, although the Sukanya Samriddhi Scheme has a higher interest rate, 100% withdrawal will only be allowed when the child turns 21. Most of the education funding requirements
are needed when the child is 18 years of age, starting graduation          
                 
                 
Divya Agarwal                
Research Analyst – Dilzer Consultants Pvt Ltd            

 

Sources
http://www.sukanyasamriddhiaccountyojana.in/
http://www.indiapost.gov.in/SukanyaSamriddhi.aspx
http://www.sukanyasamriddhiaccount.net/
http://profit.ndtv.com/news/budget/article-sukanya-samriddhi-account-vs-ppf-10-things-to-know-746367

 

8 March 2016

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