Sukanya Samriddhi Yojana Budget 2015, Tax-Free status

Sukanya Samriddhi Yojana Budget 2015, Tax-Free status

Arun Jaitley Sukanya Samriddhi Yojana - Union Budget 2015-16
Arun Jaitley Sukanya Samriddhi Yojana - Union Budget 2015-16

Sukanya Samridhhi Yojna Tax-Free Small Savings Scheme for a Girl Child

  • Finance minister, Arun Jaitley has made interest income and withdrawal from Sukanya Samriddhi Scheme tax-free.
  • In his Budget speech on Saturday, the Finance Minister said, "Investments in Sukanya Samriddhi Scheme is already eligible for deduction under Section 80C. All payments to the beneficiaries including interest pajment on deposit will also be fully exempt."
  • Sukanya Samriddhi Scheme is a new entrant in the small-savings schemes category aimed at encouraging savings for a girl child's education and marriage. The scheme was announced by the finance minister in his previous budget in July 2014 and the scheme was launched in January this year.

"UNION BUDGET 2015-16"

  • Under the scheme, parents and legal guardian can open accounts in the name of maximum two girl children up to 10 years of age. However, as part of the initial offer one year of grace period is being given. Any girl child born between 2 December 2003 and 1 December 2004 can open account up to till 1 December 2015.
  • The account can be opened in post office or scheduled commercial banks with a minimum investment of Rs 1,000 a year, and thereafter any sum in the multiple of Rs 100.
  • One has to invest at least Rs 1,000 a year. A maximum deposit of Rs 1.5 lakh is allowed under the scheme, irrespective of the number of accounts.
  • One has to deposit at least a sum of Rs 1,000 every year. An account where the minimum annual amount of Rs 1,000 is not deposited, the same can be revived by paying a penalty of Rs 50 and the minimum deposit amount for each year during which the account holder has failed to pay.
  • The scheme is currently offering an interest of 9.1% a year compounded annually. However, the rate is not fixed and would be revised every year. The interest would be credited in the account every year.

"Beti Bachao, Beti Padhao"

  • "Beti Bachao, Beti Padhao" is the mantra with which Prime Minister Narendra Modi launched Sukanya Samriddhi Yojana on January 22nd this year. Later on, the government issued a notification to allow 80C exemption equal to the amount invested in the scheme up to Rs. 1,50,000, which is also the maximum amount one can invest in this scheme in a financial year.
  • Now, the Finance Minister in his budget speech has proposed to make the interest component as well as the maturity proceeds as tax-free. I think this proposal has made this scheme to be the best small savings scheme available to the Indian investors. Yes, even better than our golden scheme of Public Provident Fund (PPF). So, what is this scheme all about? Let's check.
  • Sukanya Samriddhi Yojana is a small savings scheme which can be opened by the parents or a legal guardian of a girl child in any post office or authorised branches of some of the commercial banks. The girl child is called the "Account Holder" and the guardian is called the "Depositor" in this scheme.
  • Before I compare this scheme with PPF, let us first check the important features of this 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 a 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.

Budget 2015 has made this scheme quite attractive for the investors. If you've already exhausted your PPF deposit limit, want to save for your girl child's marriage or higher education and have spare money to invest in this scheme, then this scheme provides you one more excellent avenue of safe investment with high returns. You can wait for the next financial year's rate of interest to get announced anytime this month, if it remains higher than PPF, just go for it.
"More Details About the Sukanya Samridhi Yojna are given below"

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