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may be withdrawn for the purpose of higher education of the girl.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
: http://economictimes.indiatimes.com
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