Karnika Arun

The issue of child marriages and large dropout rates of girl child have been persisting in India since time immemorial. This is usually because of the financial burden that cannot be undertaken by the families of girl children and they find it easier warding them off to another family taking away the right to education and freedom to choose what they want. In order to help ease the financial burden for the families having a girl child, the government has introduced the Sukanya Samriddhi Yojana.

It is a small deposit scheme of the Government of India that’s exclusively for a girl child of the family. It was launched under the umbrella of the Beti Bachao Beti Padhao Campaign. These deposits are meant to meet the education or  marriage expenses of the girl child in the future giving them the financial independence to a certain extent. 

About

Any girl child who is an Indian resident since the opening of the account till its maturity is eligible. Deposits into the account should be made for at least 15 years and the account reaches maturity when the child reaches 21 years of age. Until the girl child is 18 years of age the account will be handled by the parent/guardian, post which child herself can take over the account. 

A minimum  of Rs.1000 and a maximum of Rs.1,50,000 can be deposited under this scheme. The scheme has been offering high interest rates, savings on income tax, a lock-in period and when the account reaches the maturity age, the account balance including the interest rate would be paid to the policy holder when the scheme reaches the maturity period. Birth certificate of the girl child and a PAN/Aadhar details of the parent/guardian are the required documents for opening the account.

The Sukanya Samriddhi Yojana account can be opened in any post office or authorized branch of commercial banks. 

Timeline

  • SSY account shall mature on completion of 21 years from the date of account opening or on the marriage of the account holder, whichever is earlier.
  • Deposit are allowed only for initial 15 years. Thereafter the account continues to earn interest until maturity.

Performance

In 2015, a year after the scheme was introduced, around 76,19,668 accounts were opened under the SSY scheme, and the total amount collected was Rs.2838.73 crore. According to the reports given by NDTV and Press Trust of India, as many as 1.80 Lakh accounts had been opened under the scheme in less than 2 months of its launch adding to its success. New Delhi saw 2,054 accounts being opened while 4,177 accounts were opened in Haryana and 7,620 in Uttar Pradesh. 


Graphical representation of the details of States with highest number of accounts

image 24
Source: Finance Ministry, Press Interest Bureau (2021)

The information represented is based on the number of new accounts opened under Sukanya Samriddhi Account (SSA) from 01.04.2018 to 31.10.2021 which were 1,42,73,910 as stated by the Union Minister of State for Finance Shri Pankaj Chaudhary and its distribution between the states. 

Reference:

image 25
Source: Finance Ministry, Press Interest Bureau (2021)

The lowest number of accounts was reported to be in Lakshadweep (331) during the same financial year.

Shri Pankaj Chaudhary stated that the reasons for varying numbers of accounts in different states could be the size of the population, ability and willingness of parents to save etc.

The scheme was launched in Tamil Nadu as the Selvamagal Semippu Thittam  in 2016 (Sukanya Samriddhi Account in Chennai) is a savings scheme for the benefits of girl child and more than 50,000 accounts were opened in the Chennai city region, within just one month of its launch by the Department of Posts. Being one of the higher interest earning savings schemes, Selva Magal Thittam in post office and banks has got huge popularity within no time. 

Shortcomings:

  • The lock-in period of Sukanya Samriddhi Account is very high. The amount deposited under this account matures only after 21 years of deposit. So, the account is not ideal for short term deposits. Although, the scheme allows partial withdrawal after the girl reaches the age of 18 years. Short term withdrawals in cases of serious health emergencies or accidents could be approved. 
  • Although the Sukanya Samriddhi Account currently offers an attractive interest rate there is no certainty that the interest rate charged on Sukanya Samriddhi Account will not change. The interest rate is not fixed and it may change at any time in the future. Every year the government of India would review these rates and may change as per necessity. Going forward, the scheme may not be able to attract many consumers.
  • Currently, there is no provision for operating a Sukanya Samriddhi Account online which could be one of the major drawbacks of the scheme. Had the service been provided online, it would have been able to attract more consumers.

Benefits of Sukanya Samriddhi Yojana

1. High Interest

The scheme provides a higher rate of interest than any other Savings plan that provides financial security and help for the girl children. The interest rates change every year which is declared by the government, and the interest on investment is compounded in a yearly manner. Because of the compounding process, the assets under the program will increase manifold on reaching maturity. the interest rates had been at a high of 8.5% and has fallen to 7.6% and has been maintained since April 2020 thus not accounting for inflation. 

2. Significant Tax Savings

The contributions towards the Sukanya Samriddhi Yojana for the daughter’s future are eligible for tax deductions under Section 80C of the Income Tax Act 1961. Thus, tax deductions up to Rs 1.5 lakh can be claimed out of the amount invested in the scheme. Moreover, the tax-saving benefits are also available on the interest earned and the amount received upon maturity or withdrawals. 

3. Guaranteed Maturity Benefits

Upon maturity, the account balance under the Sukanya Samriddhi Yojana, including the accumulated interest, will be paid directly to the girl child or the policy holder.. Another benefit of investing under Sukanya Samriddhi Yojana is that your accumulated savings continue to accrue compounding interest even after maturity until it is finally closed by the account holder.

Recent changes

In 2019, the government made it necessary to deposit at least the minimum Rs.250 every year into the scheme or that the account would be considered as default and such default accounts would be accounted with the interest rate that’s applicable, till the maturity date if not regularized. Earlier the default account holders could only earn the post office savings bank interest rates. 

As of 2022, the provision to withdraw the interest once it has been credited, is not allowed. It’s also not possible to withdraw twice. interest would be credited at the end of the financial year. 

The closure of the account was earlier done due to the death or change in the address of the daughter, but now in the incident of the account holder having a fatal disease or on account of premature death of the guardian are also allowed for the closure of the account.

Conclusion- Way forward

Sukanya Samridhi Yojana is a good investment for a long-term period given its fluctuating interest rates. Since its inception in 2014 the scheme has been a great success and has helped many families with girl children to open a bank account.

 Information regarding the scheme should be well read and policy holders must be well aware of the risks associated with the scheme  and should be able to reap the maximum benefits of it. Sukanya Samriddhi Yojana calculators are also available online on different sites so that customers can calculate their investment and respective returns and gather information about different banks offering the scheme. During this period the scheme also allowed opening of accounts for more than two girl children by submitting the birth certificates and an affidavit and recently the third child’s account will also be tax exempted and the opening of the accounts can be done simultaneously under the three children’s names. 

Reference Links

https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=89

https://dea.gov.in/sites/default/files/Sukanya%20Samriddhi%20Account%20Rules%2C%202016.pdf

https://economictimes.indiatimes.com/wealth/invest/all-you-need-to-know-about-sukanya-samriddhi-yojana/articleshow/55872922.cms

https://economictimes.indiatimes.com/wealth/invest/sukanya-samriddhi-yojana-important-watchouts-before-you-invest/articleshow/55183483.cms

https://www.bankbazaar.com/saving-schemes/sukanya-samriddhi-yojana-account.html

https://www.canarahsbclife.com/blog/child-plan/sukanya-samriddhi-yojana.html

https://www.personalfn.com/dwl/can-sukanya-samriddhi-yojana-be-a-good-investment-plan-for-your-girl-child

https://www.paisabazaar.com/saving-schemes/sukanya-samriddhi-yojana/

https://economictimes.indiatimes.com/wealth/invest/5-changes-in-sukanya-samriddhi-scheme-2019-that-you-need-to-know/articleshow/74504072.cms

About the Author

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Karnika A, Researcher at IMPRI Impact and Policy Research Institute. She is pursuing her MA Applied Economics from Christ University, Bengaluru. 

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