Difference of Sukanya Samriddhi Account Vs PPF (With Tax Benefits)

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)

Sukanya Samriddhi Account

In the below table, I simplified the features.

Comparison of Sukanya Samriddhi Account Vs PPF

 

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.

75 Comments

  1. Hi Sir,

    Its regarding Sukanya Samriddhi Account , I just wanted to know if i opening the account in SSA for the interest rate 8.1 percent and if the interest rate goes down or up next year , is that applicable
    For my account too. Or the interest rate when I opened was maintain forever. Please clarify.

    Reply
  2. Hello Bsasvaraj,

    Is it worth to invest 5000 every month in SSY scheme rather then repaying home loan with additional EMI amount or invest in mutual funds.

    I am little confused on this. How to invest 5000 rupees every month. Please list few options like (SSY, PPF, Mutual Funds, Etc.,) I am paying 40000 (Fourty Thousand) towards my home loan and like to double or make it 150% from Jan-2017, with this, planning to reserve enough money for child’s education expense.

    Reply
    • Prakash-Why you want to invest? Child education right? Whether you can avoid both EMI and Child Future? NO…Then the only option is to manage BOTH the things are MUST for you. If you have any surplus beyond that, then think for funding of early closure of loan. Again, for kid’s future, you have to allocate the debt:equity in a ratio based on timeframe of a goal. Refer my post “Top 10 Best SIP Mutual Funds to invest in India in 2017“.

      Reply
  3. If I deposit 1 lck in My ppf account and same in 2 new ac of SSA for My 2 daughters, then total investment will be 3 lck per annum,
    Can I do like this?
    Tax benifit total will be 1.5 lck but can I invest 3 lck or more in such way?
    Please suggest

    Reply
    • Satish-Yes, you can invest. But do you feel investing yearly Rs.3 lakh in such schemes for your long term goals is wise?

      Reply
      • Yes sir, if the scheme dont change in future, it looks better then any other ,
        So I want to do such way.
        In this way I ll get income tax rebate u/s 80 c will b 3.0 lck or only 1.5lck

        Reply
  4. When to invest to get the maximum returns out the investment in SSA.
    If I open account in May 1-5 ,how much will I loose on the benefits if the same I would have opened in 1-5 April.
    In case I want to put lump sump when should I inject in the PPF and SSA ?

    Reply
  5. Hi, Sir, can you suggest me is the SSY is really good or not? why I am thinking this because if we started this account however we have to follow the T&C of respective account, but there is no possibilities are found that Modiji’s government can rule this country up to maturity of our accounts. the next coming government can made lot of change either they good means favour of SSY OR REVERSE?

    Reply
    • Sidd-This is what I also feel and recommend PPF over this scheme.

      Reply
  6. Hello Sir,

    What is the time frame for deposition of money maximum to 150000 to avail the interest in Sukanya Samridhi Yojna.
    It is Yearly (from January to December) or it as per financial year i.e. from April to March.

    Thanking you in advance sir.

    Reply
    • Praksh-It is financial year i.e. from 1st April to next year 31st March.

      Reply
  7. Hi,

    My girld child age is 1 and 1/2 months, I am planning to have a SSY and another LIC policy. Can you suggest, is it good way to secure her life. Or else if you suggest further will help to plan for her future.

    Thanks
    Biplab

    Reply
    • Biplab-Avoid both and start investing in equity oriented mutual funds and also buy pure term plan to cover your life.

      Reply
      • Can you please elaborate about term plan, is it like LIC Endowment Plan (Table No. 830) or anything else

        Reply
        • Biplab-Term plans are pure life insurance products, where your nominee get the amount which is equal to sum assured in case of your untimely death. However, if you survive till policy period, then they will not give any money.

          Reply
  8. IF ANY EMPLOYEES HAVING MORE THAN 15000 SALARY THEN HOW MUCH THE CONTRIBUTION OF EPF PLEASE

    Reply
    • Mohan-It is 12% only. But your employer may restrict his or her own contribution to 12% of Rs.15,000 or 12% of actual salary.

      Reply
  9. As far as i understand in PPF account for any individual / individual +children below 18 -maximum total investments all put together allowed is 150000 only per Financial Year . Pl inform if in Sukanya Samridhi Scheme – for 2 Girl child can investments by one parent can be individual 150000 per girl child per Financial Year or total of 150000 for 2 girl children – Is there any such restriction ? Pl also inform if amount investment has to be uniform every year or can it vary. Pl also inform if both parents can open separate accounts for girl child or only 1 parent can open for same girl child. ( My query has no links with 80-C )

    Reply
    • Makhanlal-Your understanding about PPF is correct. But regarding Sukanya Samriddhi Scheme, the same rule applies. As of now, there is no such clarity on this.

      Reply
  10. I have a PPF account in my name and I plan to open PPF/ sukanya smridhhi in my daughter’s name. If I open a PPF in my daughter’s name, can I invest 1,5 lac each (total 3 lac investment) in these two PPF accounts (I will claim only 1.5 lac u/s 80C)?

    If there is a ceiling of 1.5 lac on all PPFs maintained, will opening a sukanya smridhhi account allow me to make a total invesent of 3 lacs (1.5 each in my PPF and daughter’s sukanya smridhhi)? I will still claim only 1.5 lac u/s 80C.

    Reply
    • VB-The maximum amount you can invest in PPF (including your own and kid’s account where you are guardian) is Rs.1,50,000. However, you can do so in Sukanya Samriddhi Account. But the maximum you can claim under Sec.80C is Rs.1.5 Lakh only. Also, do you feel investing so much aggressively into PPF and Sukanya Samriddhi Account really help your kid’s future expenses? Think and decide.

      Reply
      • Do u know where I can take goi risk and earn 9%+

        Reply
    • Partly because I am lazy and partly because I am conventional, I feel comfortable with SSA. With this account, I don’t have to worry about monitoring the stock market. I can afford to set aside 1.5 lac a year and forget about it (for 21 years). Also it gives me flexibility to adjust contribution amount as per my affordability.

      I prefer to go in for lesser but secure return viz a viz high return in a risky investment portfolio. Thanks anyways for your kind response and suggestion. Do let me know if there is a product which you feel would suit a lazy and conventional investor like me.

      Reply
      • VB-SECURED? What is secured in PPF and Sukanya Samriddhi Account? Interest rate risk is always there in these two products. Along with that a fully illiquid product.

        Reply
        • You have a point there. What would you suggest in my situation? Something that has more liquidity, less monitoring, decent return and less complicated Income Tax filing at the end of the year. Do you also offer paid investment guidance service?

          Reply
          • VB-Nothing comes easily. That applies to your investment. You work hard to earn money. But if you not work hard to manage that then someone will sell you few dummy products and you may blindly invest. You have to work to monitor your money. It does not mean that you must monitor on daily base. But the active participation is must. Otherwise no use of your EARNED MONEY. The simplest way of earning SOMETHING is keeping money in savings account. I am not degrading your thoughts. But making you anger and my only intention is to make you LEARN…LEARN and LEARN.

            Reply
        • If interest on these move down other interest rates will move down too

          Reply
          • PC-Yes, but political gimmick attached with this scheme may not harm until this NDA Govt in power. Later on, only GOD can protect the investors.

            Reply
  11. Hi Basavaraj,

    My elder brother has 2 girl childrens.

    If I invest in their names, will I be eligible to claim for Tax Exemption for my Neice?

    Please advise.

    Reply
  12. My child date of birth 04-3-2015 can i open this account

    Reply
  13. Wow great…..!
    Govt has just today announced the interest rate of various schemes for FY 15-16.
    The interest rate of sukanya samriddhi account will be 9.2 for FY15-16.
    But ppf interest rate is unchanged.

    Reply
    • Uttam-Yes I know. This Government pushing this scheme more to gain politically.

      Reply
      • Yes.I also agree with you.It is definitely a matter of politics.

        Reply
  14. my daughter DOB is 29-aug-2004, is it eligible to open the account in Sukanaya Samriddhi Scheme

    Reply
  15. Finally I have opened Sukanya Samriddhi Account in our nearest post office. I was confused where to open this account.I approached nearest SBI branch and asked Branch Manager about the possible date of implementing this scheme.He could not inform me.Though RBI has issued notification on this purpose and authorized 28 banks to open this account on 11th March,2014 .Also RBI has specified sample a/c opening form and pass book.?Use this link for a/c opening form:http://rbidocs.rbi.org.in/rdocs/content/pdfs/494SSAC110315_A3.pdf
    Also for RBI notification,use this link:http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=9594&Mode=0

    Reply
    • Please read 2015 instead of 2014 in my earlier comment.It was just my mistake.

      Reply
  16. • Account can be opened up to age of 10 years only from the date of birth. For initial operations of Scheme, one year grace has been given. With the grace, Girl child who is born between 2.12.2003 &1.12.2004 can open account up to1.12.2015.

    Reply
  17. I have a girl child born on 11 February, 2003 . Can I open this account for her even.
    with regards,
    Rajesh

    Reply
  18. I have a girl child born on 5th April 2004 . Can I open this account for her even.

    Papia

    Reply
    • Papia-Your kid already completed more than 10 Yrs and 6 months (about to complete 11 Yrs). So you are not eligible to open this account.

      Reply
      • Just to update you that I have opened the account

        Reply
        • Papia-Great going 🙂 But no need to over invest in such single debt product. Instead diversify your investment.

          Reply
  19. sir, is it necessary to declare the withdrawal amount from PPF account (withdrawal in 8th year) in income tax return file.
    Thanks.

    Reply
    • Kuldeep-Anyhow it is tax free. So even if you mention too then it will not affect your taxation.

      Reply
  20. Sir

    I am NRI and just blessed with the baby girl. I gone through your article and its very useful. My question to you as below
    1) Tax on interest in case of Sukanya samridhhi is taxable at what rate (10% may be?) or less
    2) Tax on interest deducted prior depositing to the account or need to show in father income tax sheetand then apply rebate?
    3) Since I am NRI can I avail this tax on interest under 80C and ask for rabte?

    Regards
    Suhas Zanje

    Reply
    • Read Question 3 as below

      3) Since I am NRI and I dont have ny income from the India, can I say tax on interest of sukanya samridhii account falls under 1.6 lakh income exemption and ask for refund under ITR?

      Reply
    • Suhas-First let me clear you that as of now there is no clarity on whether NRIs allowed to invest in Sukanya Samriddhi Account or not. So before investing confirm the same. 1) It is taxed according to one’s tax slab. 2) No TDS. 3) As I said above first let us wait for clarity of NRIs eligibility.

      Reply
    • As per budget 2015 (28/02/15) the interest on sukanya samridhi is not taxable.

      Reply
  21. Hai sir..

    Thanks for your valuable suggestions regarding ppf. I have one doubt about ppf.. that is
    I am having ppf account since last 10 years. now i want to start a/c to my child who is 9 years old. I porceed to SBI for opening the a/c to my son, but they are saying that systems are not accepting the age below 10 years. only who is having 10 or 10+ years can possible to open new account. Is it true.. But in post office they are accepting but manual entries are only possible at postoffice. if SBI opening is possible we can made online transactions easily. please suggest what is the minimum age to enter into PPF account

    Please give clarity…
    Thanks & regards
    sudhakar

    Reply
    • Sudhakar-They misguided you. There is no such rule. You can open account in your minor child.

      Reply
  22. Hi Sir,

    Can you please clarify if we start a PPF, is it possible that i can vary my monthly amount by fixing it a minimum per month.
    Example: I declare 500 per month but say i save 500 in month 1 and 1000 in month 2 and 1500 in month 3 and 500 in month 4. Can this be possible?
    Also please advise if it is mandatory to hold a salary/savings account in a bank which offers PPF service(I think only 5 banks currently have this facility.)

    P.S : Could you advise/direct any of your articles which are for the beginners in Shares market or for the people who have small amounts to invest in the shares.
    Many thanks,
    Pooja

    Reply
    • Pooja-Yes, you can do so. Having Savings account to invest in PPF is not mandatory. Beginners must start with mutual fund and once you understand what is equity then switch to direct equity. But direct equity is always risky.

      Reply
      • Thank you Sir.

        Reply
  23. Sir,
    Frankly to speak,I am very much impressed on this blog and I am following this blog for 3 weeks almost regularly.
    My question on sukanya samriddhi account is that:’Who will be liable for tax in intetest earned in ETE mode if one’s house wife having no income opens this account in the name of her daughter?If this answer is ‘mother’ then middle T in ETE would not probably matter.In this case can the husband claim 80c benefit?

    Reply
    • Please read interest instead of interest in my last post.

      Reply
      • Uttam-I understood what you are pointing. If wife have no income then what will be her source of income? It is from husband’s earning right? Even though husband can claim tax benefit, but still clubbing of income will arise and it will be taxable in husband’s income.

        Reply
  24. This scheme is useful only if it is EEE, otherwise this is deemed dead before birth. Government is yet to come out with clarification whether it is EEE or ETE. Therefore, please do not jump to conclusion beforehand through such blogs.

    Reply
      • No great but certainly it will better PPF or other contemporary scheme (bonds/ certificates) if higher interest rates is assured. With ETE in place, it will attract only rural India- mostly farmers.

        Reply
        • Jha-But do you feel the same 9.1% or higher to PPF will sustain to this account? It is more of a political gimmick. Wait and watch for next few years or when change of Govt.

          Reply
  25. Hi basu interest calculated is simple or compounding in sukanya samruddhi?

    Reply
  26. As always, another article from you that provides Good useful information.

    Major drawbacks of the scheme – lock in period of 21yrs, and interest taxable.
    Guess a MF SIP for 21yrs would give better returns than this scheme.

    Sandeep

    Reply
  27. Sir Your observations are correct. But One Important thing is you can have your PPF account and also open another account/s on your girls name, so that you can earn best safe interest returns over and above what we got from our PPF account.

    Reply
    • Vinay-That is correct. But when you compare the tax implications, I still feel PPF best than this scheme.

      Reply

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