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Sukanya Samriddhi Yojana Tax Benefits & Deductions
The Sukanya Samriddhi scheme was launched by the Indian Government to promote girl child education. This scheme encourages parents or guardians to save from a young age of the girl towards her higher education and marriage expenses.
The account requires a minimum deposit of Rs 250 in a financial year which can be taken to a maximum of Rs 1.5 lakhs in a financial year. Further, the interest accrued is higher than most saving schemes at 8.4%. However, the most attractive benefit is certainly the tax exemptions that this scheme offers.
What is Sukanya Samriddhi Yojana?
To promote saving for the girl child's future, the government launched the Sukanya Samriddhi Yojana (SSY) in 2015 as part of the Beti Bachao Beti Padhao campaign. This fixed-income investment offers regular deposit options, accrues interest, and provides tax benefits of up to ₹1.5 lakh annually under Section 80C of the Income Tax Act.
Features of Sukanya Samriddhi Yojana Scheme
When making financial decisions, knowing the long-term implications of the investment is important. Before you invest funds into the Sukanya Sunidhi Yojna Scheme, you should have a look over it’s features.
Interest Rate:
The government sets the SSY interest rate quarterly. For the quarter ending June 2023, the rate is 8% per annum, compounded annually. Interest is paid upon maturity or if the beneficiary's residency or citizenship changes.
Lock-in Period:
The SSY has a 21-year lock-in period. For instance, an account opened when a girl is 5 years old matures when she turns 26.
Deposits:
- A minimum annual deposit of ₹250 is required for 15 years.
- The maximum annual investment is ₹1.5 lakh.
- Deposits can be made in multiples of ₹100 via cash, cheque, demand draft, or online transfer.
- Multiple deposits are allowed within a year.
- Failure to meet the minimum annual deposit results in account discontinuation, which can be reactivated by paying a ₹50 penalty and the minimum deposit amount.
Account Transfer:
- Free transfers are available nationwide between post offices and bank branches (or vice versa) upon change of residence with proof of address.
- Other transfer reasons incur a ₹100 fee.
Number of Accounts:
- Only one SSY account is permitted per girl child.
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A maximum of two accounts are allowed per family, except in cases of:
- Triplets (all girls)
- One initial girl child followed by twin girls.
Who is eligible to invest in Sukanya Samriddhi Yajana
The Sukanya Samriddhi account has a two-part eligibility criteria: one for the beneficiary (the girl child) and one for the account opener.
Beneficiary Eligibility (Girl Child):
- Only female children are eligible.
- The age limit is typically 10 years old, with a one-year grace period. This means an account can be opened within one year of the girl turning 10.
- Age proof documentation for the girl is required.
Account Opener Eligibility:
- Only a biological parent or legal guardian can open an account on behalf of a girl child.
- Each parent or legal guardian is limited to a maximum of two accounts.
Benefits of Sukanya Samriddhi Yojana Account
Investing in the Sukanya Samriddhi Yojana (SSY) offers several key advantages:
- Guaranteed Returns: As a government-backed scheme, the SSY provides guaranteed returns. Currently offering 8% per annum, it boasts a higher return than most other government schemes.
- Tax Benefits: SSY investments qualify for tax deductions up to ₹1.5 lakh under Section 80C. Furthermore, both the earned interest and the maturity amount are tax-exempt.
- Ideal for Girl Child Planning: The SSY is an excellent option for parents of daughters, providing assured returns that can be used for their education or marriage.
- Economical Investment: With a low minimum deposit of ₹250 to open an account and a required annual deposit of the same amount to maintain its active status, the SSY is a highly affordable investment option.
Sukanya Samriddhi Yojana tax benefits
The Sukanya Samriddhi Yojana (SSY) serves dual purposes: building a financial foundation for your daughter's future and achieving tax savings. The scheme's "exempt-exempt-exempt" (EEE) status provides significant tax advantages:
- Investment Deduction: Contributions to the SSY are eligible for tax deductions under Section 80C of the Income Tax Act, up to a maximum of ₹1.5 lakh annually. Investing the full ₹1.5 lakh makes the entire amount tax-deductible.
- Tax-Free Interest: The interest earned on your SSY investment is also exempt from income tax.
- Tax-Free Maturity/Withdrawal: The maturity amount and any withdrawals are completely tax-free.
This EEE status ensures that no part of your SSY investment is subject to taxation, allowing for substantial corpus growth over time for your daughter's future needs.
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Frequently Asked Questions
Q- Is loan facility offered against Sukanya Samriddhi account?
No. Loans are not permitted against this account.
Q- Is the entire principal amount tax exempt in this scheme?
Yes. On maturity, your entire amount will be exempt from taxes.
Q- Can I change the name of a girl child in SSY account?
Yes. You need to file an affidavit with the name change request in the post office or bank wherever you have opened the account.
