A primer on government’s Sukanya Samriddhi Scheme.
Finance Minister Arun Jaitley recently proposed to give EEE or Exempt Exempt Exempt status to Sukanya Samriddhi Scheme in Union Budget 2015. Simply put, investments, accrual and proceeds will be tax free in the hands of an investor. The scheme comes under Section 80C of the Income Tax Act.
“Investments in Sukanya Samriddhi Scheme are already eligible for deduction under Section 80 C. All payments to the beneficiaries including interest payment on deposit will also be fully exempt,” said Jaitley in his Budget speech.
Launched in January 2015, Sukanya Samriddhi is a small savings scheme meant for the girl child.
Product feature
Under Sukanya Samriddhi Scheme, parents can open an account for a minor girl child, not more than 10 years old. Government has extended this scheme for girl children who are born between December 02, 2003 and December 01, 2004. Parents of such children can open an account before December 01, 2015.
The account would be open in the name of a girl child. Parents can open such accounts for their first two daughters. In case of twins, triplet or quadruplet, parents can open multiple accounts.
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Key features of Sukanya Samriddhi Scheme
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Parents can deposit a minimum of Rs.1,000. This balance needs to be maintained to avoid penalty of Rs. 50 per year. The maximum contribution to be made under such accounts is Rs.1.50 lakh a year and 14 years from the date of opening an account.
The account will mature on the completion of 21 years. However, partial withdrawal of 50% is allowed when the account holder turns 18 to meet her financial requirements like education or marriage. If not claimed on maturity, the balance in account will continue to earn interest as specified for the scheme from time to time.
In case of untimely death of an account holder, the entire proceeds will be paid to the parents.
Like PPF, the government will declare effective rate of interest each year. The government has declared an attractive interest rate of 9.1% for FY 2014-15. The interest will be compounded yearly.
Parents can open Sukanya Samriddhi account at post offices or banks.
How does it help IFAs?
Though IFAs cannot sell this scheme, it will help them create financial awareness among people.
This scheme can create a big difference for IFAs practicing in small cities and towns. Ashish Mehta from Bhilai, a small town in Chhattisgarh, is of the view that this scheme will help IFAs in creating awareness about financial products in small cities and rural areas.
“It is ideal product for risk averse investors. In fact, investors who have a girl child and are currently parking money in PPF, should consider this fund as it offers an attractive yield,” says Suresh Sadagopan of Ladder7 Wealth Advisories.
