Sukanya Samriddhi Yojana (SSY) is a savings scheme backed by the government and introduced as a part of the ‘Beti Bachao, Beti Padhao’ campaign. It aims to promote the financial well-being of the girl child and encourages parents to save for their daughter’s education and marriage expenses. Currently, the interest rate is 8 per cent compounded annually. SSY account can be opened for a girl child below the age of 10 years. The tenure of the scheme is 21 years or until the girl gets married only after the age of 18 years.
Despite its attractive interest rates and tax benefits, there are still things you need to know before investing in this scheme. Read the reasons below:
Lock-in Period: The scheme has a lock-in period of 21 years, which means that you cannot withdraw the money before the maturity period. This can be a significant disadvantage if you need the money for an emergency or other critical expenses. Premature withdrawals are only allowed in exceptional cases like untimely death, making it inflexible compared to other investment options.
Limited Deposit: The scheme does not offer any flexibility in terms of investment amount or frequency. The minimum investment amount is Rs 250, and the maximum investment is Rs 1.5 lakh per annum in a financial year. The parent will have to invest at least the minimum amount annually for up to 15 years from the date of opening. After which, the account will earn interest till maturity.
Low returns: Yes, the scheme offers a higher interest rate than most savings accounts, the returns are still lower when compared to other investment options such as mutual funds, stocks, and bonds.
Applicable only for girl children: The Sukanya Samriddhi Yojana is only applicable for the girl child, which means that you cannot invest in it for your son or any other family member. This can be a significant disadvantage for families with only male children.
Tax implications: Although the scheme offers tax benefits, the interest earned on the investment is taxable. If you withdraw the money before the maturity period, you will have to pay a penalty and lose the tax benefits as well.
Before making any investment decision always consider your financial goals and time horizon. Sometimes exploring other investment avenues that offer higher returns, greater flexibility, and better inflation protection may be more suitable for long-term wealth creation.
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