Thursday, April 2, 2015

More reason to cheer for Proud Parents of a girl Child

Lakshmi is the Goddess of wealth, and it is believed that a girl child will bring prosperity and wealth to the family she is born in. 

Prime Minister Shri Narendra Modi also adds one reason to prove it. To show his commitment towards girl child and for the campaign “Beti Bachao, Beti Padhao” he has launched a scheme exclusively for a girl child named “Sukanya Samriddhi Yojana”.

I do not know the social outcome of the scheme, but for sure financially it is one of the best schemes for proud parents of a daughter.

Appending below Features of the scheme :

Salient Features of Sukanya Samriddhi Yojana

Who can open this account? - Parents or a legal guardian of a girl child who is 10 years of age or younger than that, can open this account in the name of the child. For initial operations of the scheme, one year grace period has been provided to make it 11 years of age. With this one year grace period in age, which is valid up to December 1, 2015, you can get this account opened for a girl child who is born between December 2, 2003 and December 1, 2004.

9.1% Tax-Free Rate of Interest - This scheme has been flagged off with a 9.1% rate of interest, higher than that of PPF which stands at 8.7%. But, this rate is not fixed at 9.1% for the whole tenure and is subject to a revision every financial year like all other small savings schemes, including PPF.

Prior to the budget announcement, 9.1% annual return seemed unattractive, but not anymore, as it has been made tax exempt now. Interest amount gets added to your balance amount in the account and compounded either monthly or annually, as per your choice. Monthly interest compounding will be done only on your balance amount on completed thousands.

Duration of the Scheme - The scheme will mature on completion of 21 years from the date of opening of the account. If the account is not closed on maturity after 21 years, the balance amount will continue to earn interest as specified for the scheme every year. In case the marriage of your daughter takes place before the maturity date i.e. completion of 21 years, the operation of this account will not be permitted beyond the date of her marriage and no interest will be payable beyond the date of marriage.

Deposit for 14 years only – Though the scheme has duration of 21 years, you are required to make contributions only for the first 14 years, after which you need not deposit any further amount and your account will keep earning the interest rate applicable for the remaining 7 years. 

Premature Closure - The account can also be closed prematurely as your daughter completes 18 years of age provided she gets married before the withdrawal. As the maximum permissible age of the girl child is set as 10 years, the scheme effectively carries a minimum duration of 8 years i.e. 18 years of exit age – 10 years of entry age.

Partial Withdrawal - It is also allowed to withdraw 50% of the balance standing at the end of the preceding financial year, but only after your daughter attains the age of 18 years. So, effectively it has a complete lock-in period of at least 8 years, before which you cannot take out any money for any purposes.

Minimum/Maximum Investment - You need to deposit a minimum of Rs. 1,000 in a financial year to keep your account active. Failure to do so will make your account inactive and it could be revived only after paying a penalty of Rs. 50 along with the minimum amount required to be deposited for that year, which currently stands at Rs. 1,000.

Also, you can invest a maximum of up to Rs. 1,50,000 in a financial year. You can make your contribution to this account in as many number of times as you like.

How many accounts can be opened? - You can open only one account in the name of one girl child and a maximum of two accounts in the name of two different children. However, you can open three accounts if you are blessed with twin girls on the second occasion or if the first birth itself results into three girl children.

Nomination Facility - Nomination facility is not available in this scheme. In an unfortunate event of the death of the girl child, the account will be closed immediately and the balance will be paid to the guardian of the account holder.

Documents Required - Birth Certificate of the girl child, along with the identity proof and residence proof of the guardian, are the mandatory documents required to open an account under this scheme. You can approach any post office or authorised branches of some of the commercial banks to get this account opened.

Sukanya Samriddhi Yojana vs. Public Provident Fund (PPF)

Budget 2015 has made this scheme quite attractive for the investors. If you are an investor who exhausts entire PPF limit by depositing Rs.150000 and want to save for your girl child’s marriage or higher education. Would recommend to first investing in this scheme and then to PPF, as this scheme provides you safe investment with much higher returns.

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