Sukanya Samriddhi Yojana: All you need to know

Updated At: June 9th 2023

The Sukanya Samriddhi Yojana scheme (SSY) is a savings scheme aimed at encouraging young parents to focus on the welfare of the girl child. It offers tax deductions, exemptions from capital gains, and guaranteed returns. In this article, we explain its features and how it can be used to invest for your children's goals.

Overview and Features

It was launched by the Government of India in 2015 under the Beti Bachao, Beti Padhao Yojana. With a minimum deposit of Rs. 250, either parent can open an account for a girl child below the age of 10.

Attractive returns - Like PPF and other small savings schemes, the interest rate for SSY is declared at the start of every quarter by the government. At the time of launch, the scheme delivered 9.1% returns. For the first quarter of 2020, it is delivering a return of 7.6%.

Guaranteed, volatility-free returns - The returns on this scheme are guaranteed because it is backed by the government. Secondly, unlike equity or market-linked products, there is no drastic change in the ROI.

Tax Deduction, Tax Exemption - Being a EEE product, SSY offers tax deductions up to Rs. 1.5 lakhs under Section 80c, exemptions from capital gains, and tax exemption during withdrawal. Like PPF, what you see is what you get.

Deposits and withdrawals

Deposits need to be made every year for the first 15 years. After that, the amount will continue to accrue interest until maturity when it completes 21 years from the date of opening.

Once the girl attains the age of 18 years, she can avail partial withdrawal facility (Maximum 50% of the amount) for higher education expenses

Premature closure is permitted only for exceptional circumstances or for the marriage of the girl child after she turns 18.

How to open an account?

The application form for a new account can be obtained from a nearby Post office or authorized public/private sector bank. Alternatively, the application form can also be downloaded from the websites such as that of RBI, India Post, and authorized banks.

The parent or legal guardian has to submit identity and address proof documents like copies of Aadhaar, Driving License, or passport. The parent also needs to submit a copy of the child’s birth certificate.

After opening the account, a minimum of Rs. 250 needs to be deposited.

Sukanya Samriddhi vs PPF

Both are government backed savings schemes with many similarities. The table below highlights the differences and helps you understand whether you need one or both.

Benefit	Public Provident Fund (PPF)	Sukanya Samriddhi Yojana (SSY)
For whom?	It can be opened by any resident of India over the age of 18.	A maximum of two accounts (or three in case of twins or triplets) can be opened for girl children below the age of 10
Tax Benefits	EEE instrument offering upto Rs. 1.5 lakhs in tax deductions	EEE instrument offering upto Rs. 1.5 lakhs in tax deductions
Investment Limit	A parent may invest in one's own PPF account as well as PPF accounts for his/her children. However, the annual investment for all of them cannot exceed Rs. 1.5 lakhs.	A parent can invest upto Rs. 1.5 lakhs per annum for each SSY account. The investment in SSY isn't limited by investment in one's PPF account.
Early withdrawal	Allows partial withdrawals after 7 years of opening the account	The girl child can withdraw 50% for marriage after she turns 18
Lock-in Period	15 years from 31st March of the year in which the account was opened.	21 years from date of opening
Interest rate as on 1st April 2020	7.1%	7.6%
Extension of account	Can be extended in blocks of five years, with or without contributions.	No extension is possible.
NRI	NRIs cannot open new account, but can operate existing account	Account gets closed when the girl is no longer a resident

Since many already have a PPF account for themselves, PPF offers a lower investment limit. Secondly, it also offers a lower return compared to SSY. However, its partial withdrawal option, shorter lock-in period, and extensions make it more flexible than SSY.

The major drawbacks of SSY are its long lock-in and absence of any early withdrawal options. To illustrate, if the girl child finishes her schooling before her 18th birthday (as many do), the parent will have to look for other options to pay her college fees because 50% withdrawal is possible only after she turns 18.

Secondly, if the account was opened when the girl was 4 years old, the parent will have to keep depositing money till she turns 19, i.e. for a period of 15 years. Likewise, the account will mature only when the girl turns 25, i.e. 21 years after opening the account.

Beyond PPF & SSY

If you compare the present-day expenses for higher education or wedding, you will realize that the inflation for these goals rises much faster than the interest rate of both PPF and SSY.

Let’s assume that the type of wedding and/or education you want for your girl child costs Rs. 20 lakhs. The table below shows how much the maximum investment of Rs. 1.5 lakhs will help you meet the target.

Period	PPF at 7.1%	SSY at 7.6%	Children’s goals at 8.5%
15 years	Rs. 40.2 lakhs	Rs. 42.01 lakhs*	Rs. 68 lakhs
21 years	Rs. 72.72 lakhs	Rs. 77.62 lakhs	Rs. 1.01 crores

Clearly, even the maximum possible returns from PPF and SSY won’t be enough to meet your future goals.

For tax deductions under section 80c, SSY offers the same deduction as insurance premium, ELSS, NPS (National Pension System), repayment of home loan principal and other tax-saving options. A product like ELSS offers you better returns, same tax deductions, and a much lower lock-in period of 3 years. To see handpicked ELSS funds by Wealthy, please click here.

While its EEE status makes SSY a great fixed-income product, your portfolio will need more than that to fulfill your financial goals.