We have been getting queries for newly proposed Sukanya Samriddhi account for the girl child. And so we thought we would give our take this special savings account for girls in the week of International Women’s Day. So, here’s to the ladies!
For starters, investments in Sukanya Samridhhi account fall under the EEE category.
There is a tax exemption on the investment. Interest earned is exempted and proceeds at maturity are also tax exempt. In other words, the tax benefits are similar to those of the Public Provident Fund (PPF). This is the other reason the Sukanya Samriddhi account is getting more attention from parents.
Parents with the girl child below 10 years age are eligible to open this account in Post office and through Public sector banks.
If everything is nice what is the caveat?
- Proposed interest rate is 9.1% for FY2015-16. A bit higher than PPF. But it is linked to the market rate(base rate). We are in a downward interest rate scenario wherein falling interest is surety, hence interest earned on this account will vary.
- One can withdraw only 50% of the amount when child turns 18. Accounts mature when child turns 21 or marriage date whichever is earlier.
- Liquidity of this account is a big draw as the major fund requirement is for education i.e. graduation at 18 onwards.
- The very high maturity age of this account makes it convenient to use as a marriage fund.
- Government is looking to raise long term funds for capital expenditure. Hence the Sukanya Samriddhi scheme is being launched.
- A good large cap equity fund or a balanced fund will outperform this scheme over a long term, most likely. Moderate calculated risk on this funds will outperform considerably for the same tenure of the scheme.
What you could consider is allocating a part of your investment money in this low-risk, moderate return instrument and diversify your daughter’s fund portfolio in a secure manner.
However, if you and your spouse have a PPF account each, it’s best to invest more there and exhaust that limit of the PPF accounts (Rs.1.5lakhs for each)if one feels hassle of maintaining too many accounts.
The bottom line: The Sukanya Samriddhi Scheme is a secure, moderate return investment proposition to empower your daughter. Do consider investing in it partly.