After the Union Budget announcements on February 28, 2015, there are a lot of discussions happening about the Sukanya Samriddhi Scheme (SSS). Like many others, you also might be thinking about investing in this scheme for the welfare of your daughter. Before you do so, it is very important to know all the details about the scheme. The Sukanya Samriddhi Scheme is a part of the "Beti Bachao Beti Padhao" campaign, which was launched earlier this year. This scheme allows an individual to save and invest for a girl child’s education and marriage.
 

Some of the key features of the Sukanya Samriddhi Scheme are as follows:
 

1. Investment amount
   
   While the minimum amount that can be deposited in SSS in one financial year is Rs 1,000, the maximum amount is Rs 1,50,000.
    
2. Tax implications
   
   Deposits made up to Rs 1,50,000 in a financial year will be allowed as a deduction under section (u/s) 80C of the Income Tax Act, 1961. Moreover, the interest income earned from this scheme will be exempt from tax.
    
3. Interest
   
   Interest on the Scheme has been revised downwards to 8.6% (w.e.f. 1-4-2016) and they’ll be revised quarterly. At present, there’s a spread of 75 bps from the G-Sec yield.
    
4. Maturity
   
   You may keep investing money in SSS for up to 14 years from the date of opening of the account. However, this account will mature only when the girl child completes 21 years of age. Remember that, it is not necessary to close the account on its maturity. One may allow the account to earn interest even after maturity by not closing it.
    
5. Withdrawal
   
   (1) Withdrawal of upto a maximum of fifty per cent of the balance in the Account at the end of the financial year preceding the year of application for withdrawal, shall be allowed for the purpose of higher education of the Account holder: Provided that such withdrawal shall not be allowed unless the Account holder attains the age of eighteen years or has passed tenth standard, whichever is earlier.
   
   Let us understand the revised provisions with the help of an example:
    

   Revised withdrawal rules under SSS
   Year of application of withdrawal (assumed) (a)	2016
   Balance in the SSS account (end of the financial year preceding the year of application of withdrawal) (i.e. up to 31st March, 2015) (b) (Rs) (assumed)	3,00,000
   50% of the balance in (b) is allowed for withdrawal (c) = (b x 50%) (Rs)	1,50,000

   
   
   (2) The application for withdrawal shall be accompanied by a documentary proof in the form of a confirmed offer of admission of the Account holder in an educational institution or a fee-slip from such institution clarifying such financial requirement.
   
   (3) The withdrawal under sub-rule (1) may be made as one lump sum or in instalments, not exceeding one per year, for a maximum of five years, subject to the ceiling specified in sub-rule (1): Provided that the amount of withdrawal shall be restricted to the actual demand of fee and other charges required at the time of admission as shown in the offer of admission or the relevant fee-slip issued by the educational institution.
    

   Revised withdrawal rules under SSS
   Year of application of withdrawal (assumed) (a)	2016
   Balance in the SSS account (end of the financial year preceding the year of application of withdrawal) (i.e. up to 31st March, 2015) (b) (Rs) (assumed)	3,00,000
   50% of the balance in (b) is allowed for withdrawal (c) = (b x 50%) (Rs)	1,50,000
   Lump sum withdrawal (in 2016) (d) OR	1,50,000
   Instalments from 2016 to 2020. Amount per instalment (Rs) (1,50,000/5) (e)	30,000

   
   
   Premature withdrawal rules:
   
   (1) The Account shall mature on completion of a period of twenty-one years from the date of its opening: Provided that the final closure of the Account may be permitted before completion of such period of twenty-one years, if the account holder, on an application, makes a request for such premature closure for reasons of intended marriage of the Account holder and on furnishing of age proof confirming that the applicant will not be less than eighteen years of age on the date of marriage:
   
   Provided that no such premature closure shall be made before one month preceding the date of the marriage or after three months from the date of such marriage.
   
   (2) On maturity, the balance including interest outstanding in the Account shall be payable to the Account holder, on an application by the Account holder for closure of the Account, and on furnishing documentary proof of her identity, residence and citizenship.
   
   (3) No interest shall be payable once the Account completes twenty-one years from the date of its opening.
    
6. Eligibility
   
   If you are thinking of opening a Sukanya Samriddhi Scheme account for your little girl, then it imperative for you to keep in mind that she must not be more than 10 years old. However, for this year, the Government is allowing a grace period of 1 year, which makes girls born between December 02, 2003 and December 01, 2004 also eligible. To open this account, you need to visit a post office or an authorized branch of a public sector bank.
    

What should you do?

The important question that stands now is that should you invest in the Sukanya Samriddhi Scheme for the welfare of your daughter or the girl child for whom you are the guardian.

PersonalFN is of the view that due to the relatively high returns offered (as compared to some other debt investment avenues), strict withdrawal facility and tax benefits, the Sukanya Samriddhi Scheme is a good investment option. However, along with SSS, you must also invest in other investment instruments depending upon your risk appetite and time horizon.

If you have a high risk appetite and longer time remaining for the fulfillment of your goals (in this case your daughter’s education and / or marriage), then you can invest in equities via the Systematic Investment Plan (SIP) route offered by equity oriented mutual funds. This may help you to earn higher inflation-adjusted returns in the long run. Some less risky investment options available to you are – Public Provident Fund, Fixed Deposits, Debt oriented mutual funds and so on.

Remember, simply investing every month will not safeguard your child’s future. It is extremely necessary that you take an adequate amount of life cover for the bread earners of the house, so that in case something unfortunate happens to you or your spouse, the future of your child is not harmed. It is also necessary that you take sufficient health insurance and accident insurance cover for the entire family as medical bills are sky rocketing these days. A physical disability can be very expensive and also impair an individual’s ability to save and meet his / her financial goals.

Child’s education and marriage are some of the most important financial goals in the life of parents. Thus, it is necessary that you start planning for this as early as possible. Although you might think that your child is too young and there is ample of time left for planning for her future, let us apprise you that there is no "right" age to begin planning. On that note, we wish a very bright future to your little girl.

Add Comments