Sukanya Samriddhi Yojana vs FDs: Which one is better?

Sukanya Samriddhi Yojana vs FD

As per the Ministry of Corporate Affairs, the total number of Sukanya Samriddhi Yojana accounts created as of November 2017 stood at more than 1.26 crore, benefitting around 5.22 crore households.

Launched under the ‘Beti Bachao Beti Padhao’ campaign by the union government, the Pradhan Mantri Sukanya Samriddhi Yojana aims to enhance the financial stability of a girl child through high interest-bearing deposit accounts for an extended period.

It is one of the most popular government-mandated savings schemes available in the country for secure financial planning of all higher education and marriage related expenses of a girl child.

On the other hand, individuals can also invest in a fixed deposit scheme, as the interest rates are almost similar to the SSY plan.

However, before fixating on a particular plan, investors should compare the benefits of each policy to ensure maximum returns on the total corpus.

SSY vs FD – points of difference 

Eligibility

A Pradhan Mantri Sukanya Samriddhi Yojana can only be opened for girl children below the age of 10. Also, only such an account can be operated for a single girl child, while a family can operate only two such schemes for respective girls. Even if a household has more than two girl children, the number accounts which can be operated are limited to two.

A fixed deposit scheme, on the other hand, is not associated with any such restrictions regarding the number of accounts or age/gender barriers of investors. The total investment portfolio can be managed through multiple FD accounts for female minors, provided the legal guardian is co-applicant.

Investment limit

A Sukanya Samriddhi account requires a mandatory periodic annual contribution every year for the first 15 years. A minimum of Rs.250 has to be invested, while the maximum limit stands at Rs.1.5 lakh. Upon completion of 15 years, periodic contributions are not mandatory under this scheme.

Alternatively, a fixed deposit plan does not require monthly investments – a lump sum amount can be deposited directly to the scheme. Though financial institutions often place a lower limit on such deposits, no upper cap is present, restricting the total investment value likely to generate returns for a stipulated period.

NBFCs such as Bajaj Finance have launched an industry-first tool known as Systematic Deposit Plan, wherein monthly deposits facilitate a new FD account for a pre-determined tenor at market interest rates for that particular month. For investors looking for monthly deposit schemes at the highest FD interest rates, an SDP is an ideal option.

Liquidity

Sukanya Samriddhi Yojana comes with a stringent withdrawal policy. It comes with a tenor period of 21 years since activation, but can be withdrawn (partially or wholly) when a girl child attains the age of 18 and requires accrued funds for marriage or education.  If the funds are needed to cover higher education expenses, only 50% of the corpus can be withdrawn; the entire fund is disbursed to meet marriage expenses, provided the account holder attains 18 years.

Premature closure of a Pradhan Mantri Sukanya Samriddhi Yojana account is only facilitated in case of a girl child’s demise. Also, due to financial hardships, investors are unable to meet the minimum investment required to keep the account active, the SSY account can be closed, provided proper documentation is submitted to support the claims. Interest accrued on the deposit amount in such cases is the rate at which post office monthly savings accounts are maintained.

Fixed deposit investments, on the other hand, come with a flexible tenor of investment, as applicants can determine the period as per their financial requirements. You should plan your liquidity needs before investing in such deposits for maximum returns. However, in case emergencies requiring urgent funds, you can prematurely withdraw your FD, subject to nominal penalty deductions.

One point of similarity between SSY and FD is that both offer tax waivers on principal investment of up to Rs.1.5 lakh under Section 80C. While all Sukanya Samriddhi accounts are eligible for such tax rebate, only 5-year tax-saver FDs qualify for such exemption.

Both Pradhan Mantri Sukanya Samriddhi Yojana and fixed deposits pose as an attractive investment option to secure your child’s future. You can choose between the two schemes by comparing both the policies and selecting one suiting your financial and investment planning goals.

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Gaurav Khanna

Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at HighlightStory
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