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Should you invest in Sukanya Samriddhi Yojana?

Henil Shah
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Should you invest in Sukanya Samriddhi Yojana?

Government of India launched Sukanya Samriddhi Yojana on January 22, 2015 to promote girl child’s education. Initially, when launched the rate of interest was 9.1 per cent to 9.2 per cent.

When the account can be opened?
The account can be opened from day one up to the girl child turns 10 years from the date of birth.

Who can open this account?
A legal guardian or the natural guardian can open an account in the name of the girl child. Wherein, a legal or a natural guardian can open only one account in the name of one girl child and he/she can open maximum up to two accounts in the name of two different children.

What is the amount that needs to be deposited?
The legal or natural guardian needs to deposit a minimum of Rs. 1,000 and the subsequent deposit in multiple of Rs. 100 can be made in lumpsum with the maximum amount that can be deposited in a given financial year being Rs. 1,50,000. Though there are no restrictions on the number of deposits you make either in a month or in a financial year. If minimum Rs. 1,000 is not deposited in a given financial year then the account will be discontinued and can be revived by paying a penalty of Rs. 50 per year with the minimum amount required to be deposited for that year.

Is partial withdrawal allowed?
Yes, partial withdrawal is allowed with maximum of 50 per cent of the balance standing at the end of the preceding financial year can be made only after the girl child attains the age of 18 years. The account can be closed once the girl child has completed the age of 21 years. However, it can be prematurely closed after girl child completes the age of 18 years provided that she gets married.

What is the rate of interest provided?
Sukanya Samriddhi Yojana provides rate of interest of 8.5 per cent w.e.f. January 1, 2019 which is calculated yearly with annual compounding.

What are the tax benefits?
By investing in Sukanya Samriddhi Yojana you can avail tax benefit wherein you can claim a deduction of maximum up to Rs. 1,50,000 under Section 80C of Income Tax Act, 1961.

Should you invest in Sukanya Samriddhi Yojana?
Sukanya Samriddhi Yojana is a good initiative taken by the government to empower the girl child. However, are mutual funds a better option than investing in Sukanya Samriddhi Yojana? If we invest Rs. 1,50,000 every year in Sukanya Samriddhi Yojana from day one until your girl child attains the age of 18 years then after 18 years it would accumulate to Rs. 64 lakh assuming the interest rate throughout the period remains 8.5 per cent. However, if you invest the same amount for the same duration in aggressive hybrid funds assuming a rate of return of 10.19 per cent for the period then when your girl child turns 18 the amount accumulated would be 76.80 lakh. Although, if you are a conservative to a moderately conservative investor then investing in Sukanya Samriddhi Yojana would be a good idea, but for others investing in mutual funds would be better.

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