The government-backed Sukanya Samriddhi Yojana is aimed at helping Indian parents build a corpus for their daughters towards for their education and other needs. This scheme offers a safety net to the girl child in future while also offering tax benefits to the parents
Sukanya Samriddhi Yojana (SSY) is one of the government-backed investment schemes focused on the girl child. On March 31, 2023, the government increased rates on small saving schemes, including that on SSY. The interest was raised from 7.6 per cent to 8 per cent in SSY for the April-June quarter of 2023.
The small savings plan, launched in 2015 under the Beti Bachao Beti Padhao campaign, carries several benefits for the girl and the parents in the long term.
Before we learn how much you can save for your girl child under the scheme, let us have a quick look at what SSY offers to depositors.
The scheme offers income tax benefits under section 80C of the Income-tax Act, 1961, for a maximum amount of Rs 1.50 lakh per year. In addition to the tax benefit on the principal investment, the interest amount and maturity benefits in the scheme are also tax-exempt. So, you can save your taxes at the time of investment as well as get a tax-free income at the time of withdrawal.
In SSY, you can invest a minimum of Rs 250 and a maximum of Rs 1.5 lakh in one year. The minimum investment period is 15 years, and the maturity period is 21 years. The withdrawal from the account is allowed after the girl attains the age of 18 years. The withdrawal can be taken up to 50 per cent of the balance available in the account at the end of the previous financial year.
The account gets matured and closed after 21 years from the date of account opening or at the time of her wedding after she turns 18 years of age.
Though the account has a minimum and maximum limit for investment, there is no fixed amount that one has to invest every year. One has the flexibility to invest according to one’s financial capacity each year.
Over the years, the scheme has witnessed several revisions in interest rates ranging from 9.20 per cent to 7.60 per cent until March 31, 2023. According to the revised rates announced by the government for the April-June quarter of 2023, the rate of interest for SSY is set at 8.0 per cent per year, compounded annually. The rate has become effective from April 1, 2023.
How Much Can You Save?
Let us take the average rate of interest to be 8.0 per cent and the amount of investment at Rs 25,000 and Rs. 1.5 lakh for calculation purposes in two cases. Let us also assume that the investments are being made at the beginning of April every year.
Investment Of Rs 25,000 Per Year
On an annual lump sum investment of Rs 25,000, your corpus will grow to Rs 7,33,107 at the end of 15 years with a principal investment of Rs 3,75,000 and an interest amount of Rs 3,58,107. If you do not withdraw, and remain invested until maturity at 21 years, the total corpus size will become approximately Rs 11,63,349 (principal amount of Rs 3,75,000 and interest amount of Rs 7,88,349).
Investment Of Rs 1.5 lakh Per Year
In the second instance of a lump sum investment of Rs 1.5 lakh in the SSY account every year for 15 years, the corpus will grow to Rs 43,98,642, including a principal amount of Rs 22,50,000. The same principal investment will become approximately Rs 69,80,093 after 21 years. This means that before the girl child knows it, funds will be accumulated and she would have a strong financial safety net at her disposal when she grows up.
The interest is compounded annually in the SSY account. Thus, any small increment in the investment amount will result in a much higher maturity amount. Simply put, a higher principal investment would mean higher compounding benefits and a larger corpus.