All parents know that raising a child is neither easy nor cheap. This is especially true while making decisions and planning for big expenses like their education or marriage. Usually, you need to start saving early to work towards amassing sufficient funds to see them through. In this regard, the Sukanya Samriddhi Yojana (SSY) is a central government scheme for the betterment of the girl-child, that enables parents to save towards and support their daughter’s future. 

Who can open an account?

An SSY account can be opened for a girl-child under the age of ten by their parents or legal guardian, by visiting a post office, nationalised bank or select private banks and filling out the required paperwork. A family can open a maximum of two accounts, one per daughter, except for select circumstances when the number can be increased to three by the government – as in the case of triplets or one girl-child and twins. You can open an account with an initial payment of INR 250 and will be required to submit the birth certificate of your daughter(s). 

What are the salient features of the scheme?

Here are the key points that you need to know about operating an SSY account for your daughter(s).

1. Account details: You are allowed to open only one SSY account for each daughter. Once opened, the account can be transferred to a different bank or post office.

2. Deposits: SSY is a small deposit scheme with a minimum yearly deposit of INR 250 and a maximum deposit of INR 1.5 lakhs. You can make deposits through cash, cheque or demand draft. 

3. Interest rate: The interest rate is usually high, at around 7.6% currently, but is subject to change by notification from the government. It is compounded yearly and the amount is credited to the account. You can also opt for interest to be paid on a monthly basis. 

4. Penalties: A minimum deposit of INR 250 has to be made every year to prevent deactivation of the account. Revival of an account comes with a penalty of INR 50 plus the minimum deposit. Suppose the penalty is not paid, the entirety of the funds deposited up till the date of default will receive interest at post office savings bank account rate of around 4%. The excess interest that has been credited already will be reversed.

5. Control: Control of the account is transferred to the daughter at the time of her 18th birthday. At this time, one withdrawal of up to 50% of the funds, towards meeting the costs of higher education is permitted. 

6. Maturity: The account reaches maturity 21 years after the day the account was opened or in the event of the marriage of the beneficiary. On the other hand, the account can be closed prematurely, owing to the death of the contributor. 

Are there any tax benefits?

Apart from several attractive features, opening an SSY account for your daughter also comes with several tax benefits. All contributions made towards the scheme, till the maximum of INR 1.5 lakhs per annum, can be claimed as deductions from taxable income under Section 80C of the Income Tax Act. In addition to this, the interest earned over time and the final amount upon maturity are exempt from taxes.

Takeaway

If you are a parent of a girl-child, you should definitely think about taking advantage of the Sukanya Samriddhi Yojana scheme to plan for your daughter’s higher education and marriage. One thing to remember is that it is better to start investing in the scheme early on since the funds take 21 years to reach maturity.