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Plan for your daughter’s future and save tax at the same time
Ibrahim Khan, 30, runs a thriving auto workshop while his wife Salma, 28, works as a primary school teacher. The couple was recently blessed with a lovely daughter. When Salma’s brother Asif, a banker, came to visit the happy family along
with lots of gifts for his newborn niece, he also brought forms for enrolling her name in the Sukanya Samriddhi Yojana.
Ibrahim and Salma had several questions, and this is how Asif answered them:
What is Sukanya Samriddhi Yojana (SSY)?
SSY is a scheme of the Government of India (GoI) aimed at the betterment of every girl child in the country and is part of its Beti Bachao, Beti Padhao (Save the Girl Child, Educate the Girl Child) campaign. It is an investment scheme aimed at encouraging the parents of a girl child to save for her education and/or marriage.
Why the scheme?
In large parts of the country, a girl child is seen as a burden due to outdated cultural mores. In extreme cases, families even indulge in the abdominal practices of female feticide or female infanticide. SSY is an attempt by the GoI to reduce this by offering financial incentives if the parents of a girl child want to save for her future.
How does it work?
Parents of a girl child can open an SSY account with any branch of a designated bank or the post office. The documentation required is minimal and consists of KYC requirements. An SSY account can be opened with as little as Rs. 250; the maximum deposit allowed in a year is Rs. 1.5 lakh.
Advantages of an SSY account:
- Attractive rate of interest:
Every SSY account earns a handsome interest rate fixed time-to-time by the government. The current applicable rate is 7.6% per year.
Using an online SSY calculator, Asif demonstrated that if Ibrahim and Salma were to invest Rs. 1.5 lakh every year in the scheme; by the time his newborn niece became 21 years of age, the corpus in her SSY account would be enough to send her anywhere in the world for higher education or have a lavish wedding. What’s more, they would also get tax rebates while accumulating this corpus. - Income tax rebate:
Investments made under SSY are eligible for exemption under section 80C. This means that the amount invested in the scheme, up to a maximum of Rs.1.5 lakh, can be deducted from the taxable income of the designated guardian. - Financial literacy:
Educating your child about SSY is an excellent way of building up financial literacy among them. - Lock-in:
Unless there are exceptional circumstances, to ensure the girl’s future, the amount invested, and the interest accrued in the scheme are locked in for 21 years from the date of opening the account. This ensures that funds in the account can only be used for her future. SSY allows a premature withdrawal of up to 50% of the funds in the account for marriage (and this too only if the girl is 18 years old or more) or education. A withdrawal of up to fifty per cent of the balance credited in the account, at the end of preceding financial year is also allowed. - Proceeds paid to the girl:
To ensure that the corpus from the SSY account is not misused by the parents (keeping the larger social context of the scheme in mind), the government has mandated that the proceeds from the scheme – whether premature withdrawal or on maturity – can only be credited to the girl’s account. The idea is to make it difficult for the parents to touch this corpus which is meant for the girl’s future.
[Also Read: Gift your daughter a bright future with Sukanya Samriddhi Yojana]
Axis Bank is one of the designated banks by the Indian government to open and operate Sukanya Samriddhi Yojana accounts. Get more information online.
Disclaimer: The Source, a content creation and curation firm, has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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