The Sukanya Samriddhi Yojana (SSY) is a scheme whose main objective is to secure a girl’s child’s future. Fixed Deposits (FD) are well-liked due to their adaptable lock-in periods and high-interest rates when compared to other types of savings plans. The Sukanya Samriddhi Yojana initiative encourages parents to save for their daughter’s wedding and educational needs. Fixed deposits are financial instruments that generally offer higher interest rates to investors than regular savings accounts.
Sukanya Samriddhi Yojana
The Sukanya Samriddhi Yojana is a project that the Central Government introduced as a part of the “Beti Bachao Beti Padhao” initiative. The main purpose of this tax savings plan is to promote girl child prosperity.
Eligibility
The following are the conditions for eligibility:
- The girl child must be ten years old or younger.
- A girl’s account can be opened by the guardian or either of her parents.
- Only one account can be opened for each girl child.
- A household can open a maximum of two Sukanya Samriddhi Yojana (SSY) accounts
- The guardian or parents may register a third account in the case of twin girls.
Investment
Through participating public and private banks and post offices, investors can apply for the Sukanya Samriddhi Scheme. Investors must submit the following documents:
- The girl’s birth certificate
- Photo ID of the applicant’s parent or legal guardian
- Address proof of the applicant’s parent or legal guardian
- Additional KYC proofs like PAN and voter ID
Process Of Application
Download the application form from the Reserve Bank of India (RBI) website, the Indian Post website, or the official websites of participating public sector and private banks. Key information about the girl child and her parent or legal guardian should be entered into the form. The important fields that must be filled out on the Sukanya Samriddhi Yojana (SSY) scheme form are as follows:
- Primary Account Holder: Girl Child’s Name
- Joint Holder: Parent or guardian’s name
- Initial deposit amount
- Date and Cheque/DD Number for the Initial Deposit
- Date of birth and other information from the girl’s birth certificate
- Parent or legal guardian identification documents, such as a driver’s licence, Aadhaar, etc.
- Current and Permanent Address (as shown on the parent’s or legal guardian’s ID papers)
- Details of further KYC proofs, including PAN and voter identification cards.
Key Features of Sukanya Samriddhi Yojana (SSY)
- A tax benefit of up to Rs. 1.5 lakhs is available for investing in SSY under Section 80C of the Income Tax Act of 1961.
- The minimum investment each year is Rs.250, allowing parents and guardians more flexibility when making deposits. The highest amount that can be deposited to Sukanya Samriddhi Yojana (SSY) in a given year is Rs. 1.5 lakh.
- This plan is backed by the Indian government. Thus, there is a guarantee of returns for the girl child.
- When compared to other government-backed tax savings plans like PPF, there is a higher fixed rate of return. (The current interest rate for FY 2022-23 is 7.60% p.a.)
- One must remain invested in this scheme until the girl child is 18 or 21 years old, and it provides the benefit of compounding for long-term investment.
- The maturity profits and interest accrued on the SSY account are paid to the girl child. This enables the girl child to become financially independent at that age.
- One special advantage of SSY is that interest will continue to be paid on the account even after maturity if the account is not cancelled by the account holder.
- In the event of their transfer, the parent or guardian managing the SSY account might have it transferred from one location in the nation through another (bank/post office).
Fixed Deposit (FD)
Fixed deposits, also known as FDs, are an investment product provided by banks and Non-Banking Finance Companies (NBFCs). Investors can invest in FDs for a predetermined period of time and receive a fixed interest rate.
The investment amount is set for the specified time period once the amount is invested in a fixed deposit. Investors earn interest on the principal amount, which is credited to the FD account in accordance with the payment duration. Investors can select a payout frequency of monthly, quarterly, half-yearly, or yearly. In light of this, the interest rate is applied to the investment amount and compounded as necessary—monthly, quarterly, half-yearly, or annually.
Features of a Fixed Deposit
- The amount can only be deposited once in an FD account. Users must open a new FD plan or account for any additional investment.
- The tenure generally varies from seven days to ten years. The maturity can be chosen in days, months, or years.
- Each bank and NBFC has a different minimum investment requirement. Generally, there is no limit on the maximum amount of investment. Usually, the interest rate is more than the interest rate on savings accounts.
- Once an investment is made, the interest rate is fixed and does not vary. The fixed interest rate on any type of FD is generally unaffected by changes in the market.
- Investment options include set payouts and interest payments made at maturity. The interest will be credited to the savings account on a monthly, quarterly, half-yearly, or annual basis depending on the payout option users choose.
- Since a fixed deposit is supposed to have a lock-in period, any early withdrawal incurs a penalty and loss of interest. The fine varies from bank to bank.
- In the event of an emergency, a loan against a fixed deposit is available. Generally, such a loan will have a lower interest rate than other loans. A loan against FD is a secured loan, with the FD serving as collateral.
Difference between Sukanya Samriddhi and Fixed Deposit
Both SSY and FD are excellent investment options. However, they vary significantly in some key areas. For instance, while the Sukanya Samriddhi Yojana is a girl child welfare programme and can only be opened for a girl child, FDs can be started by any Indian resident over the age of 18.
For a better understanding, the following table compares Sukanya Samriddhi with bank FDs based on various factors:
| Category | Sukanya Samriddhi Yojana | Fixed Deposit |
| Eligibility | An account can be opened in a girl’s name by a parent or legal guardian. The child must, however, be less than 10 years old. | Any Indian citizen may open an account with a financial institution, regardless of their gender. |
| Interest Rate | The government sets the interest rate. The current interest rate is 7.6%. | The bank occasionally changes the FD interest rates. The interest rates would change based on the amount and the tenure. Senior citizens typically receive a higher interest rate from banks. |
| Investment Amount | A minimum deposit of Rs. 250 must be made at the time the account is opened. The annual maximum deposit allowed is Rs. 1.5 lakh. | The minimum sum of money required to start an account will vary depending on the bank. |
| Lock-In Period | The lock-in period is 21 years or the date of the girl’s marriage, whichever comes first. However, after the age of 18, a partial withdrawal is permitted for higher education. | The Lock-in period may last between 7 days and 10 years, or even longer. |
| Partial Withdrawal | For the purpose of marriage or higher education, up to 50% of the total amount accrued may be withdrawn. However, only until the account user turns 18 years old is a partial withdrawal permitted. Additionally, relevant documentation must be submitted. | Generally, partial withdrawal is not permitted. |
| Premature Closure | If the account holder passes away or if the funds are necessary for the treatment of life-threatening diseases, the account can be closed prematurely. When used for medical purposes, the account cannot be closed until five years have passed. | Premature closure is allowed. However, in the event of an early closure, the account holder will be required to pay a fee. The penalty fees can change depending on the bank. |
| Penalties | Deposits must be made annually. The status of the account will be changed to “Account under Default” if deposits are not made. To reactivate the account, an Rs. 50 fine must be paid. | An FD account only allows one-time investments. Penalties are levied only in the case of pre-closure. |
Interest Rate
The Sukanya Samriddhi Yojana interest rate is determined quarterly by the Central Government. The interest rate offered by the government on the Sukanya Samriddhi Yojana is currently 7.6%. The interest rate of the Sukanya Samriddhi Yojana is compounded annually. In the case of fixed deposits, every bank has its own fixed deposit interest rates, which vary based on tenure and amount. These rates are periodically changed. Senior citizens are eligible for an additional 0.50% – 0.75% interest rate over regular rates.
Eligibility
An account can be opened in a girl child’s name under the Sukanya Samriddhi Yojana by the biological parent or legal guardian. However, the girl must be under the age of ten. Generally, any Indian resident above the age of 18 can open a fixed deposit account at any bank in India.
Minimum and Maximum Deposit
The minimum first investment under the Sukanya Samriddhi Yojana is Rs. 250, and the maximum annual investment amount is Rs. 1,50,000. The minimum deposit amount for fixed deposits, however, varies from bank to bank.
Tenure
The lock-in period or tenure for a Sukanya Samriddhi Account is 21 years or the date of the girl’s marriage, whichever comes first. However, after the girl becomes 18 years old, the Sukanya Samriddhi Yojana permits a partial withdrawal for purposes related to higher education. When it comes to fixed deposits, typically, all financial institutions provide terms ranging from seven days to ten years or even longer.
Premature Withdrawal
Premature withdrawals are permitted under the Sukanya Samriddhi Yojana but are subject to certain special conditions, such as the account holder’s early demise or the need for treatment of certain life-threatening disorders. Regarding fixed deposits, some banks do permit the premature closure of fixed deposit accounts. The account holder will nevertheless be required to pay a small fine in the event of early closure. The penalty fees differ from bank to bank.
Conclusion
When comparing SSY vs. FD, both investments have advantages and disadvantages. SSY offers an interest rate that is typically higher than that of FDs, but it is only available to girls who are younger than 10 years old. Although FDs can be opened by any Indian resident, SSY is a good option for parents who want to guarantee the future of their girl child. By investing in both, one can diversify their financial portfolio. However, it is important to do research before investing.
Frequently Asked Questions (FAQs)
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What are some benefits of the Sukanya Samridhhi Yojana (SSY)?
The Sukanya Samriddhi Yojana was introduced as part of the Beti Bachao, Beti Padhao campaign. This scheme offers the girl child a number of benefits, including-
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- Cost-effective payments: A minimum of Rs. 250 must be deposited each financial year to maintain an SSY account. You are permitted to make deposits of up to Rs. 1.5 lakh every financial year. People from all socioeconomic groups appear to find the payments to be extremely reasonable. Even if you miss a minimum payment of Rs.250 for an entire year, a penalty of Rs.50 will be assessed, but the account will be continued.
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- Educational expenses covered: To pay for your daughter’s college fees, you may take 50% of the account balance as of the end of the previous financial year. This can be obtained by providing admissions documentation.
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- Interest rates: The rate is 7.6% p.a. at the moment.
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- Guaranteed profits: Since Sukanya Samriddhi Yojana is a government-backed scheme, returns are generally assured when it matures.
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- Easily Transferred: The SSY account can be transferred from any Indian post office to any Indian bank, or vice versa.
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What are some advantages of opening a fixed deposit account?
Some benefits of investing in a fixed deposit account are:
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- Guaranteed interest rate: The guaranteed rate of interest is one of the main benefits of making an investment in a fixed deposit. You will definitely earn the rate of interest set by your bank after you invest in an FD. Additionally, the interest rate on FDs is available on the official websites of banks and NBFCs. You may quickly determine the interest rate and invest with the bank or NBFC offering the highest interest rate.
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- Loan secured by a fixed deposit: In the event that you find yourself in need of money, you can apply for a loan against your fixed deposit. The interest rate on a loan secured by an FD will be lower than on an unsecured loan because the FD is used as security. The procedure is usually simple.
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- A flexible tenure: You can invest in a fixed deposit for a term that works with your goals or financial needs. You have the option of investing for a tenure of 7 days to 10 years or even longer.
Blog latest updated on 3rd May 2023.
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