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Sukanya Samriddhi Account Govts

Special Scheme for Girl child Features,


Review & Benefits
January 22, 2015 by Sreekanth Reddy 276 Comments
Sukanya Samriddhi Account (SSA) along with Beti Bachao-Beti Padhao (BBB) will be
officially launched on 22nd January, 2015. These schemes will be introduced by our
honorable Prime Minister Narendra Modi.
Sukanya Samriddhi Account/Yojana is a Small Savings Special deposit Scheme for girl child.
This scheme is specially designed for girls higher education or marriage needs.
Finance Minister Arun Jaitley had announced this scheme in his budget speech in July. The
gazette on this scheme was released on 2nd December, 2014. On 21st January, 2015 the finance
ministry released a notification with respect to the applicable interest rate on Sukanya
Samriddhi Account.
Let us understand the features and benefits of Sukanya Samriddhi Account Special Savings
deposit scheme.

Features of Sukanya Samriddhi Account (SSA):

Who can open the account? Sukanya Samriddhi a/c (or Khata) can be opened on a
girl childs name by her natural (biological) parents or legal guardian.

What is the Age limit? SSA can be opened in the name of a girl child from the
birth of the girl child till she attains the age of ten years. (Girl child who is born on or
after 02-12-2003 can open SSA/SSY account).

How many accounts can be opened? A depositor may open and operate only one
account in the name of same girl child under this scheme. The depositor (or) guardian
can open only two SSA accounts. There is one exception to this rule. The natural or
legal guardian can open two or three accounts if twin girls are born as second birth or
triplets are born in the first birth itself.

How to open a SSA account (Sukanya Savings Account opening procedure)?


Accounts in name of the girl child can be opened in post offices or in any branch of a
commercial bank that is authorized by the Central Government to open an account
under this scheme rules. As of now, the list is not drawn and many government owned
banks are still in the process of completing formalities to open the Sukanya Samriddhi
Yojana (SSY) Account, you may visit any of the government banks for the purpose of
opening the account. (Some of these banks include State Bank of India (SBI), SBH,
Bank of Baroda, Punjab National Bank, Bank of India, Canara Bank, Andhra Bank,
UCO Bank, Allahabad Bank, Corporation Bank etc.,)

What is the minimum deposit to open the account? The account may be opened
with an initial deposit of one thousand rupees. The minimum contribution in any
financial year is Rs 1000. Thereafter the contributions can in multiples of one hundred
rupees.

What is the maximum deposit amount? a minimum of one thousand rupees shall
be deposited in a financial year but the total money deposited in an account on a
single occasion or on multiple occasions shall not exceed Rs 1.5 Lakh in a financial
year.

Deposits/contributions in an account may be made for fourteen years from the date
of opening of the account.

Is there any penalty? If minimum (Rs 1000 pa) amount is not deposited, the
account will be treated as an irregular account. This can be regularized/renewed on
payment of Rs 50 per year as penalty. Along with this, the minimum specified
subscription for the year (s) of default should be paid.

What is the mode of deposit? The deposits in Sukanya Samruddhi scheme can
be made in the form of Cash or Demand Draft or Cheque. Where deposit is made by
cheque or demand draft, the date of encashment of the cheque or demand draft shall
be the date of credit to the account. The cheque or DD should be drawn in favour of
the postmaster of the concerned post office or the Manager of the concerned bank.The
depositor (parents or guardian) has to write the account holders name (childs name)
and the account number on the backside of the instrument.

What is the Rate of Interest on Sukanya Samriddhi Account? The applicable


rate of interest on SSA for the financial year 2014-2015 is 9.1%. This is one of the
highest rates of interest offered by Government on small savings scheme

Is interest rate fixed or variable? The rate of interest is not fixed and will be
notified by the central government on a yearly basis.

The account can be transferred anywhere in India if the girl shifts to a place other than
the city or locality where the account stands.

Is Premature withdrawal allowed? 50 % (half of the fund) of the accumulated


amount in SSA can be withdrawn for girls higher education and marriage after she
attains 18 years of age. The accounts balance at the end of preceding financial year is
used for the calculation.

Can the girl child operate the account? On attaining age of ten years, the account
holder that is the girl child may herself operate the account, however, deposit in the
account may be made by the guardian or parents.

Is premature closure allowed? In the event of death of the account holder, the
account shall be closed immediately on production of death certificate. the balance at
the credit of the account shall be paid along with interest till the month preceding the
month of premature closure of the account , to the guardian of the account holder.

The scheme would mature on completion of 21 years from the date of opening of the
account, with an option of keeping the account till marriage. So, the maturity of the
account is 21 years from the date of opening of account or if the girl gets married
before completion of such 21 years (whichever is earlier).

Can the girl child continue the account after her marriage? The operation of the
account shall not be permitted beyond the date of the girls marriage.

What are the required documents to open Sukanya Samriddhi Account? Birth
certificate of the girl child has to be produced. The depositor (parents or guardian) has
to submit his/her identity and address proofs.

Download Sukanya Samriddhi Account/Yojana (SSA/SSY) Application form. (This


SSA applicaiton form that can be submitted at Post office. Download the file by
clicking on the below image and go to Form 1 Post office Savings Bank page and

you can take print out of the same)

On opening an account, the depositor shall be given a pass book. It will have date of
birth of the girl child, date of opening of account, account number, name and address

of the account holder and the initial amount deposited. The depositor has to present
the passbook to the post office or bank at the time of depositing/receiving the
interest/on maturity.
Income Tax Benefits on Sukanya Samriddhi Account Scheme Section 80c
The amount that is deposited under Sukanya Samriddhi Account will be eligible for income
tax exemption under Section 80C of Income Tax Act, 1961.
At present, only the contribution of up to Rs 1.5 lakh toward Sukanya Samridhi Yojana is
eligible for tax deduction under Section 80C. The maturity amount (withdrawal amount) is
exempted from income tax. But discussions are on to also exempt the interest income. We
can expect a formal announcement on this in the coming Union Budget 2015-16.
(Issue of making interest income exempt from taxation can be done by Department of
Revenue (DoR) through legislative amendments. The matter is under examination of DoR)

Latest News : As per Budget 2015, all the payments under Sukanya Samriddhi Account /
Yojana Deposit Scheme are exempted from Income Tax. So, Deposits made under SSA Khata
/ account are exempted under Section 80C. The interest amount and maturity amount
(withdrawals) are also exempted from Income Tax. So, investments in SSA falls under
Exempt Exempt Exempt (EEE) tax category.

PPF Account (Public Provident Fund) Vs Sukanya Samriddhi Account


PPF (Public Provident Fund) has E-E-E tax rule. As per this rule contributions,
accumulation (interest amount) and withdrawal are all exempted from income tax. There is a
high chance that Sukanya Samruddhi Account may be brought under E-E-E catergory(As
of now there is no official confirmation on this. Let us wait for more information).
For the fiscal year 2014-2015 the rate of interest on PPF account is 8.70% (upto March
2015). On Sukanya Samruddhi Account this is 9.10%. So, comparatively SSA has higher
rate of interest. The interest on SSA will be calculated just like the way it is done on PPF a/c.
Sukanya Samridhi Account Interest Amount & Maturity Amount Calculation:
You may have few questions like : How is the interest amount calculated on Sukanya
Samridhi Savings scheme? What could be the total maturity amount on SSA Savings
account? What is the total interest amount that I can earn on SSA?
Before proceeding with the calculations, below are the main points/assumptions with respect
to interest and maturity amount calculations:

The contributions are allowed upto 14 years from SSA account opening date.

The SSA savings account can be operated till the completion of 21 years from the
account opening date.

The current applicable interest rate on SSA scheme is 9.1% (this rate of interest will
vary in future, as per the Central Governments future notifications.)

The interest on SSA will be calculated just like the way it is done on PPF a/c. (PPF
interest is calculated monthly on the lowest balance between the end of the 5th day
and last day of month, however the total interest in the year is added back to PPF
only at the year-end.)

I have assumed the investments are done at the beginning of every month/year and
calender year as April-March.

Sukanya Samriddhi Account/Yojna Interest & Maturity amount calculation - Scenario


1-Monthly Deposit
Example 1 - Mr Aravind Swamy wants to open the Sukanya Samridhi Savings account in the
name of his girls child (5 years old) in April 2015. He wants to contribute Rs 10,000 every
month for 14 years. He also wants to keep this account active till 21 years from the account
opening date (or till Childs age of 25 years). He wants to know, what could be the total
approximate interest amount and total maturity amount that he would accumulate under SSA?

As per above calculations, Mr Aravind Swamy can accumulate total interest amount to the
tune of Rs 45.73 Lakh. The total maturity amount on his SSA savings account can be Rs
62.53 Lakh. He also has the option to withdraw 50% of Rs29.89 Lakh when his child turns 18
years. (If he withdraws, the total maturity amount will not be as shown above.)
The present value (PV) of Rs 62.53 Lakh (maturity amount ) is Rs 8.45 Lakh, assuming
10% as Education inflation (the rate at which education/marriage expenses may increase).
Kindly think from this angle too.
Sukanya Samriddhi Account/Yojna Interest & Maturity amount calculation
Scenario 2 Yearly Deposit
Example 2 - Mr Madhavan wants to open the Sukanya Samridhi Savings account in the
name of his girls child (5 years old) in April 2015. He wants to contribute Rs 1,20,000 every
year for 14 years. He also wants to keep this account active till 21 years from the account
opening date (or till Childs age of 25 years). He wants to know, what could be the total
approximate interest amount and total maturity amount that he would accumulate under SSA?

As per the above calculations, Mr Madhavan can accumulate total interest amount to the tune
of Rs 46.32 Lakh. The total maturity amount on his SSA savings account can be Rs 63.12
Lakh. He also has the option to withdraw 50% of Rs 30.24 Lakh when his child turns 18
years. (If he withdraws, the total maturity amount will not be as shown above.)
Kindly note the difference in the maturity amounts between the monthly contribution
account and yearly contribution account.
My opinion on Sukanya Samriddhi Account Savings Scheme:
I can confidently say that the average rate of education inflation in India is somewhere
around 10% to 15%. The rate at which marriage expenses are increasing is also very high.
Given this scenario, the 9.10% rate of interest may not beat the inflation. Unlike Bank fixed
deposits, this rate of interest is not fixed.
The better way to create sufficient corpus for a Childs education is to allocate major portion
of savings to equity related instruments (if you have more than 10 years time frame). You can
then consider investing small portion of your savings towards this scheme. This scheme can
be considered as the DEBT component of your investment portfolio.

Another drawback of SSA is the number of accounts that can be operated. The number of
accounts that are allowed to open under this scheme is limited to two accounts only. Parents
of more than two girls can not open multiple Sukanya Samriddhi Accounts.

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