Sukanya Samriddhi Account: New scheme for a Girl Child In India

Query 1]
I have some queries regarding Sukanya Samriddhi Yojna (SSY). I have opened it in the month of March-2015 an account in SSA in post office with my Grand Daughter aged 3 ½ years old. I have also deposited Rs. 1.50 lakh in FY 2015-16 for saving for a child's future goals (education & marriage purpose). I am a retired person getting pension. As per scheme, SSY account can be opened by the parent or guardian in the name of girl child not more than 10 yrs old. I am a natural guardian of my Grand Daughter. Please suggest me, should I take the benefit of section 80C? [advocatemkjoshi@gmail.com]

Opinion:

“Courage, sacrifice, determination, commitment, toughness, heart, talent, guts. That's what little girls are made of” - Bethany Hamilton

About Sukanya Samriddhi Yojana (SSY)

Launched as a part of the ‘Beti Bachao Beti Padhao’ campaign of the central Government, Sukanya Samriddhi Yojana (SSY) envisages financial security for Girl child. SSY is one of the most attractive & safe debt schemes when it comes to saving for a girl child. It has sparked considerable interest due to the tax benefit and higher interest rate via a vis Public Provident Fund.

The account can be opened by the parent or legal guardian in the name of a girl child from the birth of the girl child till she attains the age of 10 years. A depositor can open and operate only one account in the name of a girl child under the scheme. For one girl, only one account is possible. Natural or legal guardian of a girl child can be allowed to open the account for two girl children only. The third account in the name of the girl child can be opened in the event of birth of twin girls, as second birth or if the first birth itself results into three girl children. This account can also be opened for adopted daughters.

Where to open Account:
Sukanya Samriddhi account can be opened in Post Offices or authorized Banks (SBI, PNB, BOB, BOI, Canara Bank, Andhra Bank, UCO Bank, and Allahabad Bank, to name the few).

Features

Minimum Rs. 1,000/- can be invested in one financial year. Maximum investment of Rs. 1,50,000/- can be made in one financial year. Any excess amount deposited will not earn any interest & such excess amount can be withdrawn anytime. Deposits in an account can be made till completion of 15 years, from the date of opening of the account. The account shall mature on completion of 21 years. The girl child strictly has to be an Indian resident throughout the tenure of the scheme. In case if the residency status of the girl child changes in the interim, no interest shall be payable from the date of change and the account will be closed prematurely.

Interest Rate:

The SSY offers 75 basis points (bps) higher than the 10-year government bond as against 25 bps by the PPF. Presently, it is offering attractive interest rate of 8.60%. Interest rate is regulated by Ministry of Finance from time to time & can be reset every quarter, similar to other small savings scheme. For the purpose of interest computation every month, the lowest account balance between 10^th and the end of the month will be considered. In effect, the amount deposited after the 10^th will not earn any interest for that month. The interest will be compounded yearly and directly credited to the account.

Tax Benefits:

Investment in Sukanya Samriddhi Yojana scheme is eligible for deduction under section 80C of the Income Tax Act. The scheme operates under E-E-E Model i.e., Principal, interest and withdrawals all are exempt from income tax. Even if the taxpayer is fully utilizing the limit of deduction u/s 80C as a result of investment in LIC/PPF/NSC/Housing loan repayment, still taxpayer can opt for investment in SSY as the interest received is higher & tax free also.

Withdrawal Facility:
To meet the financial requirements of the account holder for the purpose of higher education and marriage, account holder can avail partial withdrawal facility after attaining 18 years of age.

Mode of Investment:
Apart from cash and cheque, deposits can also be made electronically if the bank or post office has access to the facility of core banking solution.

Penalty in case of non-maintenance:
Incase if the minimum investment of Rs 1,000/- is not deposited every year, then the account will be considered to be in default. If this 'in default' status continues for 15 years, the amount deposited shall attract an interest rate equivalent to the Post Office Savings Account interest rate which is currently at 4% per annum. Default Account can be regularized by paying a fine of Rs 50 for each year the account has been in default along with such minimum specified amount for the year or years of default.
In case, if the default is due to the death of the guardian of the Account holder who opened the account, then such an account will continue to attract the interest rate notified by the Government.

Transfer of account:
The account can now be switched between banks and post office and vice versa by payment of Rs 100/- as fee. In case, the switching is due to change of residence, then a proof of change of residence needs to be submitted and no fee will be charged.

Withdrawal:
Earlier, one could withdraw 50% of the accumulated amount for education purpose, provided the girl is 18 year of age or passed Std 10^th. Now, the withdrawal will be allowed on the basis of the actual fees payable. It can either be withdrawn as a lump sum or in course of five annual installments. In case of marriage, the accumulated sum can be withdrawn one month before or three months after the date of marriage. At that time, it is imperative to provide age proof in order to prove that the child is not below 18 years of age.

Pre-mature closure:
Premature closure is not allowed now before the completion of five years. But redemption is allowed in cases of extreme compassionate grounds such as medical support in life-threatening diseases of the Account holder or death of the guardian. In such instances, interest paid will be equivalent to post office savings.

In your specific case, you are the legal guardian of your granddaughter. As a result, investment done by you in the SSY account maintained for your grand daughter would be eligible for deduction u/s 80C of the Income Tax Act-1961.

[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
Nagpur-440008
or email it at nareshjakhotia@ssrpn.com]

SSRPN & CoChartered Accountants

Chartered Accountant