Everything you need to know about Sukanya Samriddhi Scheme

An investment option that focuses on the welfare of your adorable daughter while it also helps in saving some tax burden? It is time you stopped brainstorming because this well-to-do scheme will put all your woes to rest.

Without further ado, let us dive into the details of the scheme and learn about its benefits and also what you should look into before you invest in the scheme.

What is Sukanya Samriddhi Yojana?

To curb female feticide and promote the birth of a 'girl child', Prime Minister Narendra Modi launched the Sukanya Samriddhi Account scheme on January 22, 2015, as a part of the Beti Bachao, Beti Padhao campaign. It encourages them to create a fund for their female child for potential education and marriage expenses. Accounts under this scheme can be opened by visiting the post office or branches of authorized banks.

Eligibility

• The Sukanya Samriddhi Account (SSA) can be opened by the parents or legal guardians only in the name of the girl child.
• The girl must be under the age of 10 at the time the account is opened.
• The scheme promotes only one account against one girl child.
• For a family, only two Sukanya Samriddhi accounts are allowed. However, if the first birth results in twin or triplet girls, then only an additional account can be opened in case of second birth of a single girl child. In case the first child is a single girl child and the second birth bears twin or triplet girls, only then more than two accounts are allowed to be opened. In all other cases, accounts more than two will not be allowed.

Key points to keep in mind while investing under the Scheme

Deposit amount

• The minimum amount to be deposited annually is Rs.250 at a single point of time and thereafter in multiples of Rs.50.
• The maximum amount that can be deposited in a year is Rs.1.50 lakh. Any deposit made in excess can be withdrawn.
• The maximum period of deposit every year is 15 years from the date of opening the account.
• It is mandatory to invest in the scheme every year, otherwise, your account will rescind.
• You can revive the account in due course by payment of a penalty of Rs.50 per year along with the minimum specified amount per year.
• The deposits can be made in cash, cheque, demand draft, through electronic means in the concerned post office, designated banks
• The account opened under this scheme cannot be operated by the girl child unless she attains 18 years of age.

Interest Rate

• The rate of interest is revised quarterly. The interest rate for the fourth quarter (January 1, 2021 to March 31, 2021) is 7.6% for the financial year 2020-2021.
• No interest will be received if the girl becomes a non-resident of India.

Withdrawal

• Withdrawal of up to 50% of the balance in the account is allowed for higher education of the girl child.
• Such withdrawal is not permitted unless the girl child attains 18 years of age or passes the 10^th standard, whichever is earlier.
• The application for withdrawal has to be assisted with documentary proof or fee-slip for confirmation of admission of the girl child in an educational institution.

Documents required to open the account

Few basic documents are required to open an SSY account:

• Birth certificate of the girl child.
• Parents’ or guardians’ identity and residential proof.
• Medical certificate in case of multiple children (girls) born during a single birth (including an affidavit)
• Any other proof/certificates as required by the post office or banks.

Closure of the account

• The account closes after the girl child attains 21 years.
• You can request the closure of account if you marry off your daughter at 18 years of age by furnishing a declaration duly signed on non-judicial stamp paper attested by the notary supported with proof of age confirming that the applicant will not be less than eighteen years of age on the date of marriage
• Premature closure is allowed in the following cases;
  • Death of the girl child - If the girl child prematurely dies, then the parent or the legal guardian can claim the final amount and the accrued interest by submitting the relevant documents verifying the death of the account holder.
  • If the post office or bank is convinced that in case of extreme compassionate grounds such as medical support in life-threatening diseases of the account holder or death of the guardian that the operation or continuation of the account is causing undue hardship to the account holder.
  • However, no premature closure of an account shall be made before the completion of five years from the date of opening of the account.
• It is important to note that initially, the parent, legal guardian, or the girl child needed to inform within one month in case of change of residential status to a non-resident, post which the account would be defunct. However, post amendment in the rules, no such provisions exist and hence, the account shall stand operative even if the girl child’s residential status changes to Non-Resident. However, the benefits shall be available only on non-repatriation basis.
• In case the account holder ceases to be a citizen of India, the account shall stand defunct.
• In case of premature closure of account due to any reason, the interest rate on such account shall be the same as prescribed for Post Office Savings Bank Account.

Tax Benefits of the scheme

1. As per Section 80C of the Income Tax Act,1961, investments made under the Sukanya Samriddhi Yojana are eligible for deductions, subject to a maximum limit of Rs.1.50 lakh.
2. It is a long-term investment and hence provides the benefit of compounding.
3. The interest credited to the account which gets compounded annually is also exempt from tax.
4. The amount withdrawn from the account is also exempt.

Conclusion

SSY investments are considered EEE investments (Exempt, Exempt, Exempt). It means that the principal, interest, and maturity amount are all exempt from tax. It is also a great scheme as it offers the highest interest rates in comparison with other investment schemes.

Sakshi Jain is skilled in handling legal as well as compliance aspects of Domestic and Corporate Taxation. She is a CA Final Student and an LLB student. She can also be reached at sakshijain.1995@outlook.com