Few of our readers are questioning on why to go with Sukanya Samriddhi Yojana and lock amount for so long when we have Recurring Deposits and other investment avenues like PPF. I have already compared Sukanya Samriddhi Yojana with Public Provident Fund here.
Comparing Recurring Deposits with Sukanya Samriddhi Deposits is not fair because one is specifically for the betterment of the Girl Child future and other is for general short term purpose. Although both are good investment avenues but if we see from the tax point of view than Sukanya Samriddhi Scheme scores above Recurring Deposits but seeing from the liquidity point of view than Recurring Deposits offers for the tenure as low as of 6 months which is far shorter than the tenure of 21 years of Sukanya Samriddhi Account.
Lets, look at the major differences between both of the investment avenues.
How Sukanya Samriddhi Yojana is better than Recurring Deposits?
Parameters | Sukanya Samriddhi Yojana | Recurring Deposits |
| Eligibility | For the Girl Child aged 10 years or below but no NRI. | For any person (minor with guardian) including NRI. |
| Where to Open | Post Offices and Banks | Post Offices and Banks but NRI can only open RD account in Banks. |
| Number of Accounts | One Account per Girl Child | No Limit |
| Purpose | For Girl Child Higher Education and Marriage | For short term goals like buying car, children hostel fees or even for buying expensive LCD |
| Nature | Long-Term Debt Scheme | Short-Term Debt Scheme |
| Minimum Investment | Rs.1,000 per year | Rs.100 per month |
| Maximum Investment | Rs.1.50 lakhs | No limit |
| Penalty for default in paying contribution | Rs.50 per year | Rs.1.50 to Rs.2 for every Rs.100 per month |
| Minimum Tenure | Fixed Tenure of 21 years. | 6 months |
| Maximum Tenure | 10 years | |
| Interest Rate | 9.20% p.a. | 8.40% p.a. for 1 to 5 years RD. |
| Interest Calculation | Compounded Yearly | Compounded Quarterly |
| Tax Benefits on Deposits | Deductible u/s 80C of Income Tax | Not Deductible u/s 80C |
| Tax Benefits on Interest | Tax-Free | Will be taxed under the head of other incomes.If account belongs to minor then deduction of Rs.1,500 from the total interest u/s 10(32) can be claimed. |
| Tax Benefits on Maturity Amount | Tax-Free | Fully Taxable with no exemption. |
| Loans | No loan can be taken on the SSA balance | Up to 90% of the available balance |
| TDS Applicability | No TDS is to be deducted from the Interest Income. | TDS is to be deducted from the Interest Income. |
| Premature Withdrawal | Not allowed. | 1% penalty |
| Maturity Calculator | Sukanya Samridhhi Calculator | RD Calculator |
Note:
- SBI Interest Rates are taken for reference for Recurring Deposits.
- Interest Rate of Recurring Deposits may vary from bank to bank and according to tenure of the deposits.
- Recurring Deposits for minor below may be opened as a joint account with the guardian but minor of 10 years or above can open recurring deposits for himself/herself by showing birth certificate. (Source: PNB)
Final Words
I strongly advocate on having sukanya samriddhi account for every girl child because with the magic of compounding, a small amount of Rs.1,000 per year will become a hefty amount at the time of maturity and with no premature withdrawal, the aim of instituting the sukanya samriddhi scheme will be fulfilled.
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