With development, we believe the mindset of people is also changing. Gone are those days when the boys had an upper edge over their counterpart.
In today’s era, in every walk of life, girls have matched up to boys and the boundary is drawing to the short end of the straw.
While equality between the two sexes is now improving, investing remains an area where girls continue to stay in focus for their parents.
One of the main reasons due to which the most powerful section of the society was not given importance was financial constraints.
The government has rightly taken steps towards this and has launched numerous schemes by way of which you can financially empower your girl child while saving your tax.
One such scheme is Sukanya Samriddhi Scheme. In this blog, we seek to discuss the plan in detail, its provisions and how you can put it to use for tax saving.
In this article
- About the Scheme
- Key Features of the Scheme
- Benefits of Sukanya Samriddhi Yojana
- Other Facts
- 16 Things you need to know when opting to invest in Sukanya Samriddhi Yojana scheme
- 1. Opening an Account under SSY
- 2. What are the documents required to open a Sukanya Samriddhi Yojana account?
- 3. What makes a girl eligible for Sukanya Samriddhi Yojana account?
- 4. For how long can the deposits be made?
- 5. What are the methods of investment?
- 6. How is the amount of interest receivable calculated?
- 7. What amount can be deposited every year?
- 8. What is the penalty in the event of non-payment of the annual deposit?
- 9. How can the normalizing of a default account be done?
- 10. What are the taxes benefits?
- 11. When does the Sukanya Samriddhi Yojana investment mature?
- 12. Is Sukanya Samriddhi Yojana account transferrable to another bank or post office?
- 13. How can the withdrawals be made?
- 14. Under what circumstances does the premature closure of the account take place?
- 15. What are the documents required at the time of the closure of the account?
- 16. How is the rate of interest on deposits calculated?
About the Scheme
The Sukanya Samriddhi Yojana (SSY) is an initiative that is designed to help the girl child fulfill her education. The programme was launched in 2015 by the Prime Minister, Shri Narendra Damodardas Modi.
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The scheme comes under the aegis of Beti Bachao, Beti Padhao campaign, and seeks to build a bright future for the girl child.
The scheme motivates the parents to invest in the well being of their daughter, offering incentives to all parties concerned.
Key Features of the Scheme
Some of the critical elements of Sukanya Samriddhi Yojana are mentioned below –
Parent or guardian of a girl child can invest an amount that suits their budget. Investments can range between Rs 1000 and Rs 1.5 Lakh per year.
2.Multiple Account Opening Avenues
The account for SSY can be opened either in a post office or a nationalized bank. This scheme provides with flexibility and easy account opening option.
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Under the scheme, only one account is allowed for a girl child. A parent can’t open multiple accounts for the same child.
Also, a maximum number of accounts permissible in a family is two – one for each girl child. The two account limit is not applicable if twins are born after the first daughter.
4.Account Opening Age
The parents/guardian of the child can open the account until the child attains ten years of age. Once the child crosses this age, the parents are not allowed to open an account.
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Maturity period for an account under SSY is 21 years after it is set up. The account holder has an option to keep the account operational even after maturity.
The operation of the account is limited to the parents and guardian until the age of 10 years. Once the child attains the age of 10 years, she can operate the account independently.
The Sukanya Samriddhi Yojana account can be opened only for Indian citizens.
Let us now talk about the benefits of the scheme.
Benefits of Sukanya Samriddhi Yojana
Some of the key benefits of the scheme are illustrated below –
The government has offered many tax incentives with an aim to catch the fancy of individuals. Following are the tax benefits
1.Parents/guardians who open the account on behalf of the girl child gets tax exemption the investment amount under section 80C of the Income Tax Act.
2.The tax benefit is provided to the girl child at the time of withdrawal of money. The entire maturity amount is exempted from tax.
3.Interest accrued is exempted from tax.
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Currently, the scheme earns around 8-9% of annualized returns. This return is higher than the interest rate offered by traditional deposits.
The interest rate offered under the scheme changes. The interest rate is determined based on the decision of the government.
A provision for partial withdrawal is allowed. However, this can be utilized only when the girl child achieves 18 years of age. To add withdrawal up to 50 percent is permitted should the girl child is getting married or pursuing higher education.
Following documents are required if you wish to open an account for your daughter.
A copy of the birth certificate is required before opening the account.
The document is needed to validate the age and as-as per the scheme details the age of the girl child should be less than ten years at the time of opening of the account.
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Valid identity proof of the parent/guardian is required who is opening the account on behalf of his/her daughter.
3.Proof of Residence
Proof of residency such as Ration card, voter’s ID, utility bill, etc. need to be submitted.
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These are two more important facts about Sukanya Samriddhi Yojana
Under the Sukanya Samriddhi Yojana scheme, an individual can make deposits annually either in the form of a lump sum payment or through regular investments over time.
Sukanya Samriddhi Yojana account is transferable from one post office to a bank after filling the form.
16 Things you need to know when opting to invest in Sukanya Samriddhi Yojana scheme
1. Opening an Account under SSY
The Sukanya Samriddhi Yojana account can be opened for a maximum of 2 girls of the eligible age from a family. A mother or father or a legal guardian can open the account in the name of the girl any time after the girl is born to until she reaches the age of 10. This scheme is now also accessible for adopted daughters.
2. What are the documents required to open a Sukanya Samriddhi Yojana account?
When a person wants to open an account under Sukanya Samriddhi Yojana, he or she needs to submit some necessary documents in order to open the account. These documents are mandatory in order to open an SSY account with a bank or post office. Given below is the list of documents:
- The application form to open the account under Sukanya Samriddhi Yojana scheme.
- Birth Certificate of the girl child under whose name the account opening application has been submitted.
- Identity proof and residential address proof of the girl child’s parents or legal guardian.
3. What makes a girl eligible for Sukanya Samriddhi Yojana account?
The girl child must be an Indian resident all through the time period of the scheme. In the event that the girl’s residency changes during the period of the SSY scheme, no interest will be paid from the date of change and the account will be shut ahead of time.
4. For how long can the deposits be made?
Now the deposits can be done for 15 years from the date the account was opened. Before that, the tenure was 14 years.
5. What are the methods of investment?
A parent or the legal guardian of the girl can deposit the money in the form of cash or cheque. Moreover, deposits can also be transferred using electronic means but only if the concerning bank or post office offers an online transfer facility.
6. How is the amount of interest receivable calculated?
To evaluate the interest every month, the lowermost amount between the time period of 10th and the end of the month is considered. Interest rates payables through with Sukanya Samriddhi Yojana scheme are reviewed every quarter, just like any other small savings scheme. According to that rule, until June 2016, the deposits were earning 8.6% interest, whereas, during 2015-16, it was 9.2%.
7. What amount can be deposited every year?
The minimum amount that can be deposited in a Sukanya Samriddhi Yojana account is ₹1,000 and the maximum amount is ₹1.5 lakh every year. Any amount deposited in excess of ₹1.5 lakh will not receive any interest. Moreover, the excess amount can be taken out anytime.
8. What is the penalty in the event of non-payment of the annual deposit?
If the depositor fails to pay the minimum amount of ₹1,000 every year, it will be considered as ‘in default’ status for the account. If the default status lasts for 15 years, the rate of interest payable will be equal to the interest rate of post office savings account.
However, in case the default occurs due to the demise of the guardian of the girl who is the account holder, the account will continue to earn interest based on interest rate reported by the Government.
9. How can the normalizing of a default account be done?
In case your account is ‘in default’ status, you can bring it back to normal status by compensating a fine of ₹50 for every year, for the number of years the account has been ‘in default’ status. Along with the fine, the minimum specified deposit must also be made for the years of default.
10. What are the taxes benefits?
The amount, which is deposited under the SSY scheme, is entitled to deduction under Section 80C of Income-tax Act 1961 and it enjoys Exempt-Exempt-Exempt (EEE) tax regime under section 80C. The tax deduction is allowed up to ₹1.5 Lakhs and any amount deposited in excess of ₹1.5 lakhs will not be liable for deductions.
11. When does the Sukanya Samriddhi Yojana investment mature?
The SSY account matures when 21 years are completed since the date on which the account was opened. Once the maturity period is over, no additional interests are paid on the deposited amount even if the account is not closed on the maturity date. Before the changes were made, interest was paid until the date account was closed.
Before the rules concerning the maturity period of the Sukanya Samriddhi Yojana investment were changed, the account was supposed closed at the time when the girl who was also the account holder got married. On the other hand, as per the new guidelines, the account can remain open until the age of 21, even if the girl gets married before that.
12. Is Sukanya Samriddhi Yojana account transferrable to another bank or post office?
Yes, the account can now be transferred to different authorized banks and post offices just by paying a small payment of ₹100 as a fee. However, if the transfer needs to be done because of the change in residential address, then evidence of the change of residence address must be submitted with the transfer application. No fee will be charged in that case.
13. How can the withdrawals be made?
Previously, one could take out 50% of the total balance of the account for education purpose, given that the girl must be 18 year of age or above and must have passed 10th Standard. However, at present, the amount can be withdrawn based on the real fees payable for an educational course. The amount can be taken out at once or it can be withdrawn in the form of annual installments during the course of five years.
In case the girl child gets married, the total balance of the account can be withdrawn one month before the marriage takes place or three months after the marriage date. During the withdrawal, it is necessary to submit the age proof with the purpose of proving that the girl is not under the age of 18.
14. Under what circumstances does the premature closure of the account take place?
Previously, premature closing of an account could be accomplished at any point in time. However, under the current regulations, it is not allowed before the end of the first five years from the date the account was opened. But then again if there is any extreme situation like a life-threatening disease of the account holder or the demise of the guardian, they can withdraw the money. Under those situations, the rate of interest paid will be equal to the interest rate payable on the post office savings.
15. What are the documents required at the time of the closure of the account?
Similar to opening an account, closing an account also requires certain necessary documents. Given below is the list of mandatory documents required:
- An application form that must be submitted for closing the account.
- Identity proof, residential address proof, and citizenship proof
16. How is the rate of interest on deposits calculated?
The government decides the interest rates on a three-monthly basis, based on the G-sec yields. The rate of interest that the Sukanya Samriddhi Yojana offers during the G-sec rate of comparable maturity is 75 basis points. The rate of interest since the day the SSY scheme was launched is as follows:
From April 1- 2014 to March 31- 2015- 9.1%
From April 1, 2015, to March 31, 2016- 9.2%
From April 1, 2016, to June 30, 2016: 8.6%
From July 1, 2016, to September 30, 2016: 8.6%
From October 1, 2016, to December 31, 2016: 8.5%
Interest Rates for FY 2017-18 is 8.3%
Interest rate notified by the government that is compounded annually is credited to the SSY account until it finishes 15 years. It is imperative to remember that all the withdrawals that are made from the SSY account should be done exclusively in the name of the girl child.
Disclaimer: The views expressed in this post are that of the author and not those of Groww