Sukanya Samriddhi Yojana (SSY) is a fixed-income program supported by the government. It is intended to assist parents save money for their daughters’ education and wedding. If you are having a girl child, then SSY scheme is definitely a beneficial scheme, in which parents can enrol to secure their girl child’s future. I strongly believe that securing a girl child’s future is very important, as they are the future pillars of our family. An English proverb explains this in a beautiful way – “My son is my son till he have got him a wife, but my daughter is my daughter all the days of her life.”
The SSY scheme offers an annual interest rate of 8.2 percent (the government resets interest rates every quarter). It is an exempt-exempt-exempt (EEE) investment instrument. What exactly does EEE mean? It implies that payments made to SSY are tax deductible under Section 80C. The interest generated is tax-free, as are the maturity monies. SSY has no credit risk because it is backed by the government of India.
An account can be set for a girl under the age of ten. It matures 21 years after the conclusion of the fiscal year in which it was opened. Accounts can be setup for a maximum of two daughters. In each fiscal year, a maximum of Rs. 1.5 lakh can be invested for each kid.
Attractive tax-free return:
Of all the small savings schemes, SSY gives the highest interest rate. Furthermore, the interest is not subject to taxes. While the Senior Citizens Savings Scheme gives 8.2 percent, the interest is taxed. Currently, SSY pays 1.1 percentage points more than the Public Provident Fund (PPF), which pays only 7.1%. SSY is devoid of market risk. Because it is government-backed, SSY is essentially risk-free investing. Its stringent lock-in policy guarantees that funds are kept for the girl’s education or wedding. This makes it excellent for those who struggle to be disciplined in saving for long-term objectives.
It is clearly one of the safe, high-return fetching instruments in today’s investment world, as an investment product should have to provide a return of over 12% to provide an 8.2% post-tax return for a person in the 30% tax band.
Some of the issues with SSY:
SSY comes with a lengthy lock-in period. Money cannot be taken from SSY before its 21-year term expires if it is required for anything other than the female child’s education or marriage. Contributions to SSY can only be made for 15 of its 21-year term. Also, the yearly investment is limited to 1.5 lakh. SSY allows for early closure if the girl achieves the age of 18 and is getting married. Partial withdrawal is permitted if she becomes 18 or completes 10th standard in schooling. Money can be taken in a lump sum or in annual payments for up to five years, as long as it is utilized to pay the child’s fee.
However, partial withdrawals are limited to 50 percent of the amount at the end of the preceding fiscal year. The product’s restricted liquidity might be advantageous to some. The lock-in guarantees that money is kept for the female child’s education and marriage and not used for other purposes.
Those who are uneasy with prolonged lock-in periods may find SSY less attractive. While SSY’s 8.2 percent interest rate is appealing, stocks have the potential for better long-term gains. Historical evidence reveals that equities markets may provide strong double-digit returns for two decades or more.
SSY accounts may only be established for Indian resident girls. A change in resident status must be notified within a month to the bank or post office in which you have created the SSY account. If this is not done, the account is considered closed from the date of the status modification and no interest are credited subsequently. Closing an account before relocating overseas might be difficult because the account holder is still a resident of the country until he leaves. And if her residency status changes, it may be difficult to visit the branch to close the SSY account.
SSY matures in 21 years with no extension option (unlike PPF, which matures in 15 years but may be prolonged forever in five-year chunks).
Final words:
SSY is a fantastic alternative for parents with female children who desire a debt product (where returns are assured) but don’t mind the low liquidity.
Given the high and constantly rising expenditures, as well as the annual investment cap of Rs. 1.5 lakh, investing in SSY alone may not be sufficient to cover your daughter’s school and marriage expenses. A newborn girl child’s college education and wedding might easily be 17 to 25 years apart.
You can take some risk with your portfolio to achieve such goals. You can try to invest in equity mutual funds. You might begin a systematic investment plan with an index fund to save money for these long-term objectives. However, you should be wary of investing in insurance-cum-investment products, as many of these provide poor returns, but are being sold by the agents and companies for high commissions.
In the below table, I have also tried to summarise the returns and tax treatments of all the key Small Savings Schemes that are present currently, so that investors can take better informed decisions while investing in these.
| Instrument | Compounding frequency | Rate of return | Tax benefit |
| Sukanya Samriddhi Yojana (SSY) Scheme | Annually | 8.2% | Section 80C benefit; interest income is tax free |
| Senior Citizens Savings Plan | Quarterly | 8.2% | Section 80C benefit; interest income is taxable |
| National Savings Certificate | Annually | 7.7% | Section 80C benefit; interest income is taxable |
| Kisan Vikas Patra | Annually | 7.5% | Interest income is taxable |
| Public Provident Fund (PPF) | Annually | 7.1% | Section 80C benefit; interest income is tax free |
