Public Provident Fund vs Sukanya Samriddhi Yojana (PPF vs SSY) account: Both Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) are very popular savings schemes. They allow you to accumulate a corpus over a period of time and provide guaranteed tax-free returns. However, an SSY account can be opened only in the name of a girl child, while anyone can have one PPF account in his/her name.
Wondering which of these two savings schemes is better for your girl child? The correct answer to this depends on your requirement as both the schemes have certain advantages and disadvantages depending on the need of the account holder. This article explains different situations in which either of the two schemes may prove to be better. Take a look:
At present the SSY account is offering a higher interest rate at 7.6 per cent, while the interest on PPF deposits is just 7.1 per cent.
While comparing the two schemes in terms of interest rates or returns, it is important to note that the government revises the interest rates of all small savings schemes, including PPF and SSY, on a quarterly basis. Hence, the interest rate you see today may not be the same, say in the next quarter.
However, ever since the launch of the scheme for the girl child, the government has offered a higher than PPF interest rate on the SSY account. Even when the interest rates on all savings schemes have dipped, SSY continues to offer a better interest rate than the PPF.
Long term investing
SSY account has to be mandatorily closed after the completion of 21 years of opening. This is not the same for the PPF account as it can be extended in blocks of 5 years each for any number of times you wish. Literally, one can have a PPF account for his/her entire lifetime!
Hence, if it comes to choosing between the two schemes, PPF would be a better option if you want to accumulate money for your daughter beyond 21 years. Another, and probably the best option, would be to have both PPF and SSY accounts in the name of your daughter. You may choose to deposit a large amount in the SSY account till it is offering a higher interest rate and some in the PPF account. So that even after the SSY account is closed after 21 years, you can continue depositing in her PPF account. Or, your daughter can also deposit in the PPF account when she grows up and starts earning money.
The minimum amount that you need to deposit in a PPF account in a year is Rs 500.
One important point to note here is that on the maturity of the SSY account, you will face difficulty in re-investing the accumulated amount in any other tax-free investment scheme. As the maximum amount you can invest in any scheme (like PPF) for tax-saving under Section 80C is Rs 1.5 lakh per year. However, if you will need the accumulated corpus for other expenses like marriage or higher education of your daughter, the SSY savings would turn out to be useful.