Sukanya
Samriddhi Yojana (SSY) is targeted towards a girl child and her
financial needs such as education and marriage. However, as the exact
age at which she would require the funds is uncertain, the scheme tries
to be flexible. The investors, on the other hand, need to keep in mind
five important years or time spans before taking the plunge in SSY.
Consider, for instance, the girl child's age, and the time left for her
education and marriage.
Opening an account (0-10 years)
An SSY account can only be opened in the name of a girl child
(beneficiary) below 10 years, as on the date of the opening of the
account. The date of birth proof is, therefore, essential. The rules
allow for the opening of a maximum of two accounts for two girls in a
family. One can't open two accounts for one girl. The girl child's age
is very important to find out the duration of the scheme. Here's why:
5 years
The request for the first premature closure of an SSY account can be put
forward after the completion of five years of the account opening. That
too, as per the rules, on extreme compassionate grounds such as medical
support in life-threatening diseases. Still, if the account has to be
closed for another reason, it will be allowed, but the entire deposit
will only get interest of a Post Office Savings Bank account.
10 years
When the beneficiary, i.e., the girl child crosses the age of 10, she
can operate the account on her own. She can make any future
contributions to her own account. The parents, too, can continue to
deposit in the same account.
15 years
To open an SSY account, a minimum initial deposit of Rs 1,000 is
required. Thereafter, a minimum of Rs 1,000 up to a maximum of Rs 1.5
lakh can be deposited in the account annually. To
keep the account active, deposits need to be made only for the initial
15 years. For a 9-year-old, deposits have to continue till the child
turns 24. Between ages 24 and 30 (when the account matures), the account
keeps earning interest on the balance.
SSY is a long-term
investment scheme. The partial and full withdrawal window is sacrosanct
subject to applications made to foreclose the account prematurely.
18 years
The next window for withdrawals is allowed when the girl turns 18. And
the rules make it clear that the funds are for her needs and not used
for any other purpose. A maximum of 50 per cent of the account balance
of the preceding year may be withdrawn for the purpose of higher
education of the girl.
For this, not just a
written application, but a documentary proof in the form of a confirmed
admission offer in an educational institution or a fee slip from such
institution clarifying such financial requirement is required. Further,
the withdrawal amount will 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 institution.
21 years
Irrespective of the age, the SSY account will run for 21 years from the
date of its opening. So if the girl child's age is 9, the scheme will
mature when she turns 30. The rules, however, permit final closure
anytime before 21 years if the parent files an application for such
premature closure for the purpose of her marriage and confirms through
an affidavit that the applicant is not below 18 years on the date of
marriage. At times, this could be a roadblock as the closure is subject
to conditions as seen above.
The attractiveness
SSY carries the highest tax-free return with sovereign guarantee and
comes with the exempt-exempt-exempt (EEE) status. The annual deposit
(contributions) qualifies for Section 80C benefit and the maturity
benefits are non-taxable. SSY can be opened in a post office or a bank.
One can also make deposits through electronic means, i.e., e-transfer to
the concerned post office or bank if either has access to the core
banking facility.
Alternative investments
SSY is a dedicated scheme for a girl child's needs. Public Provident
Fund (PPF), a 15-year scheme that also comes with loan and partial
withdrawals facilities, can be an alternative. Although a PPF account
can be extended in block of five years after the initial 15 years, the
possibility of funds being used for other purposes exists.
As per the rules, at any
point of time, the interest rate of SSY will always be higher than that
of PPF. For both schemes, the government fixes the interest rate on
quarterly basis based on the G-sec yields.The interest rate and spread
that SSY enjoys over the G-sec rate of comparable maturity is 75 basis
points compared to PPF's 25.
Currently, the interest
rate of SSY is 8.5 per cent per annum compounded annually, while it is 8
per cent per annum for PPF. Mark the date in SSY as there will not be
any interest on the amount deposited after the 10th for that specific
month. Even when compared to traditional life insurance plans, SSY
scores higher, especially when combined with a term insurance plan.
Conclusion
Estimate how much inflated-adjusted funds would be needed for the
education and marriage of the girl child. SSY is a debt investment,
therefore, for a long-term need, relying more on equities helps. One may
use it to invest a portion of the funds earmarked for the girl child's
needs and not entirely depend on it.
This could apply even to those
who have exhausted their annual Section 80C limit of Rs 1.5 lakh.
Simultaneously, buy a pure term insurance to provide adequate life cover
to the financial dependents. Understandably, for younger kids, the time
duration for accumulating funds would be more compared to those nearing
10 years, but still SSY can be a part of one's portfolio
Source:- The Economic Times
