Recently Government launched a girl child scheme called Sukanya Samriddhi Account and I have already written about this in my earlier post. When you compare this scheme with PPF, many features look similar with slight changes. So in this post let us discuss about this (including the tax benefit of Sukanya Samriddhi Account under Sec.80 C)
In the below table, I simplified the features.
So now, you can see the difference along with that what may be the negative points of this scheme over PPF. The major drawbacks over PPF are listed as below.
Tenure-This account has a tenure of 21 years with contributing term as 14 years. Whereas, PPF offers 15 year tenure where you can contribute for 15 years too.
Interest Rate-Currently Sukanya Samriddhi Account offers a higher interest rate at 9.1% whereas PPF at 8.7%. However, the big question is, whether the next Governments offer the same lucrative interest rate? I doubt it.
Interest rate of Sukanya Samriddhi Scheme for 2015-16 will be 9.2% and whereas for PPF it remained 8.7%.
Tax Benefits-Sukanya Samriddhi Account and PPF offers EEE type of tax benefits. It means while investing, you get the tax benefit under Sec.80 C. Interest earned is tax free (According to Budget 2015) and maturity benefit is tax-free. So both plan offers EEE (Exempt-Exempt-Exempt).
Liquidity-This account is less liquid than PPF. Because you cannot withdraw until girl attains the age of 18 years.
Investment option-This account does not offer online investment facilities. Whereas you can operate PPF account online.
So overall, when you compare this product with PPF, you notice that apart from the interest rate and specific to girl, none of the features holds good with PPF. Hence, my view is that PPF holds well than this account.
You can opt the account if you are totally risk averse and still believe in traditional products for the sake of safety and ready to invest higher amounts than going by equity-oriented mutual funds. This plan best suites for those who feel the risk free return (remember in this scheme interest rate changes yearly and interest earned is taxed) and offers more return than typical child insurance plans.