Sukanya Samriddhi Yojana is a small savings scheme designed exclusively for the welfare of a girl child in a family. It was initiated by the government of India to inculcate the saving habit in parents/guardians of the girl child to build a corpus for her higher education and marriage expenses. Under this scheme, the biological parent or legal guardian of a girl child can open an account for in her name until she reaches 10 years of age. This scheme comes under the “Beti Bachao – Beti Padhao” programme initiative of the Government of India. SSY also offers tax benefits under Section 80C for up to Rs 1.5 Lakh. Also, it is known to offer a higher rate of interest as compared to other small savings schemes.
Fixed deposits, on the other, are financial instruments that provide fixed interest rates to the depositors on the basis of tenure selected. An FD with any of the public or private sector bank provides a better rate of interest than a regular savings account.
Both SSY and FD are good investment options but have a vast difference when it comes to certain parameters. For instance, while the Sukanya Samriddhi Yojana is a girl child welfare scheme and can be opened for a girl child only but FDs can be opened by any Indian resident above 18 years.
|Parameters||Fixed Deposit||Sukanya Samriddhi Account|
|Interest rate||Bank FD interest rates are revised from time to time. Interest rates depend on the tenure and the amount.||7.60%|
|Eligible age to enter||18 Years||Birth|
|Minimum Deposit||Differs for every bank||Rs.250|
|Maximum Deposit||No limit||Rs.1,50,000|
|Tax Benefit||up to Rs.1,50,000 and the interest generated is taxable||Rs.1,50,000|
|Tenure||Differs for every bank (usually 7 days to 10 years)||21 years|
|Premature Withdrawal||Premature withdrawal is allowed with a penalty which differs for every bank||After the age of 18 or before that but subject to certain conditions|
|Nomination Facility||Available||Not Available|
|Loan Facility||Available||Not Available|
|Extension of the tenure||Not Available||Available|
The above table talks about the brief difference based on different parameters. In this section, we have compared both in-depth.
The SSY interest rate is decided by the Central Government quarterly. Currently, the interest rate provided by the Government on Sukanya Samriddhi Yojana is 7.6% for Q3 (October-December) of FY 2020-21. The SSY interest rate of interest is compounded annually. If calculated on a monthly basis, the minimum balance between the 10th and the end of the month is taken into consideration.
The FD interest rates for Bank is revised from time to time and is different for every bank depending on the tenure and the amount. The rate of interest offered by Axis Bank ranges between 2.50% to 5.50%. The interest rates offered by Yes Bank ranges between 3.50% and 6.75%. Senior citizens can avail an extra 0.50% interest rate over regular rates.
Under SSY, the biological parent or legal guardian can open an account under the name of a girl child. However, the child must be less than 10 years old. Whereas, any Indian citizen above 18 years can open an FD account at any of the banks across India.
The initial investment under SSY starts from Rs. 250 and the maximum investment amount can go up to Rs. 1,50,000 annually with further deposits in the multiples of Rs. 100. Whereas when it comes to fixed deposits, the minimum deposit amount varies from bank to bank. For example, in Axis Bank, the minimum investment amount if the FD is being booked via the mobile app or Internet Banking is Rs 5,000. But the minimum investment amount if booked by visiting the branch is Rs 10,000.
The lock-in period or the tenure for a Sukanya Samriddhi Account is 21 years or when the girl child gets married, whichever is earlier. However, SSY allows partial withdrawal for higher education purposes after the girl has attained 18 years of age. When it comes to FD, the general tenure range is between 7 days and 10 years for almost all the financial institutions.
Premature withdrawal is allowed under SSY but is subject to certain special conditions such as if the case the account holder has an untimely demise or in the case the money is required for treatment of some life-threatening diseases. However, in the case of medical purposes, the account can only be closed after having the account maintained for a period of 5 years.
Talking about FDs, banks do allow the premature closure of the fixed deposit accounts. However, there is a nominal penalty that the account holder will have to pay in case of premature closure. The penalty charges vary depending on the bank.
Tax benefits of up to Rs.1.5 lakh can be availed under Section 80C of the Income Tax Act for any investments made towards the SSY scheme. For FDs also tax benefits up to Rs.1.5 talk is provided and can be availed under Section 80C of the Income Tax Act. In the case of FD, however, the account must have been completed 5 years. Also, the interest generated on FDs is fully taxable if the interest income for the year is more than Rs. 10000.
Under the SSY account, the account matures after 21 years but the account holders are allowed to continue with their account. However, account extensions are not allowed in the case of FDs and the entire amount should be withdrawn upon maturity.
Holistically, when we talk about SSY vs FD, both investment methods have their pros and cons. SSY offers a higher rate of interest than FDs but is only eligible for a girl child only up to 10 years of age. If someone has a girl child and wishes to secure her future then SSY is undoubtedly the best fit but FDs can be opened by any Indian resident. One can also diversify their investment portfolio by investing in both but due diligence is advised before investing.