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Investing your hard-earned money is a crucial decision and needs thorough research and analysis of the available options. Some of the factors that should be considered are financial objective, risk appetite, interest rates, flexibility and so on. Indian residents have multiple options to choose from especially with the launch of multiple savings schemes by the government of India.

Sukanya Samriddhi Yojana Account (SSY) and Public Provident Fund (PPF) are amongst the most considered safest investment options as they are backed by the Indian Government. These investment options are easily available for investors seeking substantial financial growth with a minimal risk factor.

Public Provident Fund vs Sukanya Samriddhi Account

Both PPF and SSY are good investment schemes but differ on some parameters. While the Sukanya Samriddhi Yojana is a girl child welfare scheme which helps to secure the future of a girl child, the PPF is a scheme that allows the depositors to earn tax-free interest.

Public Provident Fund (PPF) scheme is a long-term investment option in India. This scheme is aimed at providing substantial returns along with tax benefits to the investor. A PPF account can be opened in almost all the public and private sector banks across India. Apart from Banks, it can also be opened in post offices. PPF returns are fully exempt from tax under Section 80C of the Income Tax Act. Furthermore, depositors can also save tax by depositing a minimum of Rs.500 to a maximum Rs.1,50,000 in one financial year, along with facilities such as loan, withdrawal, and extension of account.

Initiated as a part of the government’s ‘Beti Bachao, Beti Padhao’ campaign, Sukanya Samriddhi Yojana or SSY is a welfare scheme designed for the girl child. An SSY account can be opened in any bank or post office across India. Investing in Sukanya Samriddhi Yojana allows parents or legal guardians to ensure financial security for a girl child aged ten years or below. Under the Sukanya Samriddhi Yojana, an account in the name of the girl can be opened across any of the private and public sector banks for a tenure of 21 years.

One thing to note here is an SSY account can only be opened in the name of a girl child while a PPF account can be opened by anyone. However, both the savings scheme have their pros and cons. The below-given table will compare PPF and Sukanya Samriddhi Account based on different parameters:

Parameters Public Provident Fund Sukanya Samriddhi Account
Interest rate 7.10% 7.60%
Eligible age to enter 15 Years Birth
Minimum Deposit Rs.500 Rs.250
Maximum Deposit Rs.1,50,000 Rs.1,50,000
Tax Benefit Rs.1,50,000 Rs.1,50,000
Tenure 15 years 21 years
Premature Withdrawal After 5 financial years After the age of 18
Nomination Facility Available Not Available
Loan Facility Available Not Available

In-Depth Analysis of SSY vs PPF

The above table chalks out the difference based on different parameters. This section explains the two Government-backed savings scheme in-depth comparing the tenure, how it works, eligibility, documents, interest rate, tax benefits, objectives of the schemes and interest rates offered.

Who can open the account?

A Sukanya Samriddhi Account can be opened by the biological parents or the legal guardian of a girl child. The criteria to open the account is the girl child should be a resident Indian and at most 10 years old. On the other hand, the PPF account can be opened by anyone (even minor PPF account can be opened). An individual who is a resident of India, not an NRI, can open a PPF account. The age of entry in PPF is generally 18 years.

Deposit Limit

Both the schemes can be opened with a very minimal amount; for PPF, the minimum deposit amount needed is Rs.500 and the maximum is Rs.1,50,000. On the other hand, for Sukanya Samriddhi Account, the minimum deposit should be Rs.250 whereas the maximum limit is again Rs.1,50,000.

Interest Rate Provided

The interest rates are not always the same for both the saving schemes and keep changing in the financial year as decided by the Government. The return is fixed and reviewed by the Government in quarterly. An SSY Account currently provides a rate of interest of 7.6% for Q3 (October-December) of FY 2020-21. The interest for this is compounded annually. While if one calculates the interest on a monthly basis, the minimum balance in SSY account between the 10th and the end of the month is taken into consideration. This means that the investments must be made before the 10th of every month.

Coming to the PPF interest rate for Q3 2020 (October-December), it is provided at 7.1%. To calculate the interest, the lowest balance between the 5th to the last day of each month is taken into consideration. Hence, the investments must be made before the 5th of every month.

Tax Benefits

Investments in PPF are eligible for exemption under Section 80(C) of the Income Tax Act,1961. Thus, the interest accrued at the time of maturity is exempt from any taxes. If the contribution towards PPF is of Rs.1.5 lakh per year (which is also the maximum deposit amount) and you are in the 30% tax category, you will be able to save taxes amounting to Rs.45,000.

Similarly, Sukanya Samriddhi Account also falls under the same category and they are eligible for exemptions under Section 80C of the Act. The interest accrued and final amount on maturity are also exempt from taxes. As mentioned earlier, SSY also has a cap of Rs.1.5 lakh investment per financial year.

Withdrawal

Under PPF, partial or complete withdrawal can be made after the end of 6 financial years from the account opening date. However, it is advisable that one should check with the respective bank to understand partial withdrawal process in a lucid way. Some major private sector banks such as ICICI and Axis allow partial withdrawals after 5 years and some after 7 years (such as SBI and HDFC).

Withdrawals under Sukanya Samriddhi Account, are allowed only after the girl child turns 18 years and can be used for higher education purpose.

Account maturity

The tenure for a PPF account is 15 years from the end of the financial year in which the account was issued. However, the depositor is allowed to withdraw the maturity amount, extend the tenure of the scheme and contributions. Whereas, a Sukanya Samriddhi Account will mature once the girl child reaches the age of 21 years. Partial withdrawal can be done in an SSY account after the age of 18 years that too only for higher education purposes.

Nomination Facility

A depositor can nominate someone under the PPF scheme but the same is not allowed for SSY depositors.

Loan facility

Loans can be availed under the PPF scheme but not under SSY.

On a Closing Note

Both the saving scheme has its own pros and cons and choosing between PPF and SSY is clearly a dilemma between more flexibility and better returns. PPF offers better flexibility and SSA provides you with higher returns. In any case, risk appetite doesn’t come into the scene, so you can clearly invest in both of them if you have surplus amount.

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