Types of Savings and Investment
Sukanya Samriddhi Yojana
The next type of deposit scheme that we will discuss here is 'Sukanya Samriddhi Yojana' which is a small deposit scheme of the Government of India meant exclusively for the girl child and is launched as a part of 'Beti Bachao Beti Padhao Campaign'. The scheme is meant to meet the education and marriage expenses of a girl.
The minimum amount that needs to be invested is ₹1000 and a maximum of ₹ 1.5 lakh can be deposited in a year. Parents or guardians of a girl who is 10 years or below can open this account. Withdrawals cannot be made till the girl attains 18 years of age. A depositor can open only one account in case of one girl and two different accounts in the name of two different girls.
The scheme will mature after the completion of 21 years from the date of opening of the account. According to the scheme rules, a depositor is required to make deposits every year till the completion of 15 years from the date of opening of account. Between the 15th year and 21st year, no deposits are required to be made. However, the depositor will be earning interest on the earlier deposits made.
How to Open a Sukanya Samriddhi Yojana Account?
The following documents are required to open a Sukanya Samriddhi Yojana account:
- Birth Certificate of the girl
- Proof of identity of the parent/guardian. For example, driving license, Aadhaar Card, PAN Card, Passport, Voter’s ID Card
- Proof of residence or current address proof of the parent/guardian
This account can be opened in both, post offices as well as banks. It is not necessary to have a savings account in the same financial institution where the Sukanya Samriddhi Yojana account has been opened.
Interest Rate Mechanism
For Sukanya Samriddhi Yojana Account, the interest rate is 7.6% p.a. compounded annually. The interest rate is linked to the government bond yield. The Government reviews the interest rates quarterly and any changes in interest rates would be applied to old as well as new deposits.
The following table gives a detailed description of interest earned by the father of a daughter who has opened this account as his daughter completed 2 years of age. He deposits ₹50000 yearly:
The scheme has exempt-exempt-exempt (EEE) status, where the deposits, the interest earned as well as the maturity amount are tax-free. The sum invested in this account is eligible for tax deduction under Section 80C subject to a maximum of ₹ 1.5 lakh in a financial year. On maturity, the entire amount, including the interest, is tax free.
Risk associated with Sukanya Samriddhi Yojana account
There is no risk involved as these deposits are backed by the Government of India. Principal and Interest are guaranteed. If inflation turns out to be higher than the nominal interest rate of the scheme, there would be no real returns available. Hence, it is not inflation protected.