Sukanya Samriddhi Yojana: Latest Interest Rate, Eligibility, and Benefits

It provides a structured avenue for risk-averse investors, offering assured returns over a defined period. This article delves into the latest interest rates, eligibility criteria, and benefits of the Sukanya Samriddhi Yojana, empowering parents and legal guardians to make informed decisions regarding their daughters' financial futures.

What Is Sukanya Samriddhi Yojana?

Sukanya Samriddhi Yojana (SSY) is a government-backed saving scheme designed for the equal rights and betterment of the girl child in India. The scheme aims to financially secure the future of a girl child by helping the parents accumulate a corpus for their child's future goals, such as higher education, weddings, etc.

What Is the Eligibility Criteria to Open a Sukanya Samrddhi Yojana Account?

The government has set the SSY eligibility criteria as follows:

• This program exclusively caters to girls residing in India

• Girls must be under the age of ten at the time of opening the account

• Up to two girls from the same family can be registered in this scheme. A third account can be opened for twin girls within a family

• It is mandatory to provide proof of age for the children during the account opening process

To open an SSY account, a minimum deposit of Rs 250 is required, with an upper limit of Rs 1.5 lakh per account within a financial year. There are no restrictions on the frequency of deposits, whether monthly or annually. Failing to maintain the minimum deposit attracts a penalty of Rs 50 to keep the account active.

The Sukanya Samriddhi Yojana account remains locked for 21 years, allowing deposits to be made either monthly or annually during the initial 15 years of account opening. Although investments are not permissible beyond this initial period, the account continues to accrue interest for the subsequent six years, eventually maturing after 21 years.

Upon maturity, the proceeds of the Sukanya Samriddhi Yojana are designated for the benefit of the girl child and cannot be utilised by the parent or guardian for personal financial purposes. Upon attaining 18 years, the girl child becomes eligible for a single early withdrawal under specific circumstances, with the withdrawal limit set at 50% of the remaining balance in the SSY account.

What Are the Benefits of Investing in the Sukanya Samriddhi Yojana?

1. Competitive Interest Rate:

The Sukanya Samriddhi Yojana stands out with its attractive interest rates compared to other small saving schemes. Interest compounds annually and accrues monthly, facilitating the growth of a substantial fund for your daughter's future. Using the online Sukanya Samriddhi Yojana calculator can help estimate potential returns. The government periodically announces the interest rate for the scheme.

2. Tax Advantages:

Sukanya Samriddhi Yojana (SSY) provides a substantial tax-free yield as it comes under exempt-exempt-exempt (EEE) tax status. Under Section 80C of the Income Tax Act, 1961, contributors can claim a tax deduction of up to Rs 1.5 Lakhs. Furthermore, both the accrued interest and the maturity amount are exempt from taxation.

3. Compound Interest:

The principle of compounded interest significantly enhances the overall returns, particularly as the scheme is designed for long-term investment.

4. Government Endorsement:

As an initiative approved by the Ministry of Finance, Government of India, the Sukanya Samriddhi Yojana guarantees returns upon maturity.

5. Secure Lock-in Period:

With a lock-in period of 21 years from the account's inception, the scheme ensures that funds are safeguarded for the girl child's benefit, discouraging their use for personal financial needs. However, a single premature withdrawal, limited to 50% of the account balance, is permissible when the girl child turns 18, typically for higher education expenses.

6. Financial Flexibility:

Maintaining an active account requires a minimum annual deposit of Rs 250, providing flexibility for depositors. Even if maximum contributions were not feasible in the preceding year, a minimum deposit of Rs 250 suffices to retain account activity. Additionally, upon reaching age 10, the girl child gains the autonomy to manage her account.

7. Transferability:

In the event of a change in residence or location, a Sukanya Samriddhi Yojana account can be seamlessly transferred to another bank or post office, ensuring continued accessibility and convenience for the account holder.

What Is the Current Interest Rate for the Sukanya Samriddhi Yojana?

The government announced the interest rate for Sukanya Samriddhi Yojana based on the performance of government securities. This rate is reviewed every quarter and remains fixed once determined. Currently, the annual interest rate for Sukanya Samriddhi Account is set at 8.2% p.a. Below is a summary of interest rates for the scheme since its inception:

How Does the Interest Rate Calculation Work?

The government adjusts SSY interest rates every three months. However, you can estimate the potential maturity amount by utilising various online Sukanya Samriddhi Yojana calculators that consider the latest interest rates.

Here's an example for better clarity:

Let's say you decide to invest Rs 1,50,000 annually for your three-year-old daughter's future. By opting for the SSY scheme with the current 8.2% annual interest rate, you embark on a 15-year investment journey. This accumulates to a total investment of Rs 22.5 lakhs over the 15-year period.

However, the scheme's maturity period extends to 21 years. This implies that your investment duration spans 15 years, during which you continue to earn interest on your deposited sum for an additional 6 years.

Upon completing the full 21-year term, you can withdraw the maturity amount. In this example, the accrued interest amount would be a total of Rs 46,77,578. Assuming a consistent 8.2% annual interest rate throughout, the final sum in 2045 would be Rs 69,27,578.

How to Open a Sukanya Samriddhi Yojana Account?

An SSY account can be opened at any post office or participating public or private bank. Currently, there is no provision for online opening of a Sukanya Samriddhi Account.

To open a Sukanya Samriddhi Yojana account for your girl child, you will need to furnish the birth certificate of the girl child and KYC documents of a parent or guardian, including a photograph, along with a filled-out Sukanya Samriddhi Yojana form and an initial payment via cheque or DD. Additionally, the bank or post office may request further documentation.

You can get the Sukanya Samriddhi Yojana form from:

• - The Reserve Bank of India's website

• - The Indian Post website

• - The official websites of participating public or private banks

What Are the Guidelines for Early Withdrawal from Sukanya Samriddhi Yojana?

For Marriage:

• An early withdrawal from Sukanya Samriddhi Yojana is permissible if the girl child reaches the age of 18 and is getting married.

• The girl child must apply for early withdrawal at least one month before or within three months after the wedding.

• Documentation required includes identity proof and evidence of marriage.

In Other Scenarios:

• If the girl child relocates from the country and becomes a Non-Resident Indian (NRI), it is important to notify the relevant authorities promptly to close the account.

• In the unfortunate event of the girl child's demise, the parent/guardian can close the Sukanya Samriddhi Yojana account prematurely. The remaining balance is transferred to their account upon submitting pertinent documents such as the death certificate.

• The bank or post office may authorise early withdrawal of the scheme after five years in the event of the parent/guardian's demise and the girl child facing financial hardships.

What Are the Disadvantages of Sukanya Samriddhi Yojana?

• The government of India reviews the interest rate of the Sukanya Samriddhi Yojana annually and may make adjustments as deemed necessary. Therefore, the higher interest rate is not guaranteed, and further cuts may occur if required.

• While the lock-in period ensures that funds are not utilised for the personal needs of parents or guardians, the 21-year duration may not be suitable for everyone.

• The scheme imposes limitations on the number of girl children who can benefit from it. A third girl child is ineligible for scheme benefits.

• The account opening and operation processes for Sukanya Samriddhi Yojana have not been digitised and are not available online. This may cause inconvenience to individuals who prefer to conduct financial transactions online.

• Since the scheme's management is subject to annual union budget assessments and market performance, it may be vulnerable to political instabilities.

To conclude:

Investing in Sukanya Samriddhi Yojana is prudent for those seeking a long-term scheme with guaranteed returns. However, it is crucial to acknowledge that the government reviews the scheme annually and can adjust the interest rate as necessary. Before investing, it is advisable to utilise online Sukanya Samriddhi Yojana calculators provided on the websites of participating banks to estimate potential returns.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.