Investing for the girl child: How can Sukanya Samriddhi Yojana (SSY) help?

By: |
November 09, 2021 3:37 PM

SSY is a government-backed deposit scheme aimed at saving for the financial goals of the girl child.

sukanya samriddhi yojanaRepresentative image

In view of rising costs, there are many ways in which parents can save and invest to provide a better life to their girl child. However, most of the investment options come with certain associated risks or limits. No parents would like to take any risk while saving money to secure the financial future of their girl child. If you are also looking to save for your girl child then Central Government’s Sukanya Samriddhi Yojana (SSY) is something you must take a look at.

SSY is a government-backed deposit scheme aimed at saving for the financial goals of the girl child. The returns under the scheme are guaranteed by the government. Moreover, parents can also enjoy tax benefits on the amount deposited in an SSY account.

At present, SSY is offering 7.6% interest on deposits. This rate is revised quarterly by the Government. However, for the last several quarters, the Central Government has not changed the SSY account interest rate. The SSY interest rate is higher than other small savings schemes like Public Provident Fund, National Savings Certificate (NSC). It is also better than the interest rates on fixed deposits currently being offered by most of the leading public and private sector banks.

SSY was launched by the Central Government as a part of its ‘Beti Bachao, Beti Padhao’ campaign. Since then, the government has offered higher than other savings scheme interest rates on SSY deposits.

For parents worried about rising costs of education and every other thing around, safety and high-interest rate make SSY the go-to investment option.

ALSO READ | Public Provident Fund vs Sukanya Samriddhi Yojana: Which is better for girl child? 

The SSY account matures in 21 years. So if you open an SSY account for a 5-year-old girl child, the account will mature after 21 years, i.e. when she becomes 26 years old. However, withdrawal from the SSY account is allowed after age 18 on account of marriage. The girl child can make a deposit in the scheme on her own after age 18 while the parents can also continue to do the same.

Interestingly, while the SSY account matures in 21 years, parents need to make deposits in the scheme only for the initial 15 years. After that, the account will continue till maturity but no deposit will be required.

SSY account can be opened only in the name of a girl child aged below 10 years. In one family, two SSY accounts can be opened.

Under SSY, the maximum deposit allowed in a financial year is Rs 1.5 lakh. One can open the SSY account in the name of a girl child by depositing as little as Rs 250.

Since the interest rate under the SSY account can change in any quarter of a financial year, it is not possible to calculate the exact maturity in advance. However, assuming a return of 7.6 per cent on deposits of Rs 1.5 lakh for 15 years, the maturity amount after 21 years can be expected to be approximately Rs 66 lakh.

Tax Benefit

SSY scheme is beneficial from the income tax point of view as well. The SSY deposits enjoy E-E-E tax benefits. This means, contribution to the SSY account gets tax benefit under Section 80C, while the interest earned and the maturity amount also remain tax-free.

What should you do? 

For parents looking to save money to meet the financial goals of their girl child, SSY can help in accumulating funds. However, to create a sizeable corpus for long-term goals, parents should also look to invest in equity mutual funds and other options after taking suggestions from a professional financial advisor.

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