If you are a proud father of a daughter, the Budget 2015-16 has brought another round of good new for you. The budget brings a provision to make interest earned on all contribution towards Sukanya Samriddhi Scheme absolutely exempt from taxes. Sukanya Samriddhi Scheme which is already part of 80C portfolio now becomes EEE (Exempt, Exempt, Exempt) Scheme. This means that contributions will be eligible for exemptions, interest earned will be exempt and maturity amount or withdrawal will also be exempt.
Another scheme with such EEE benefits is PPF which is also qualified for 80C benefits along with exemptions on interest earned and maturity amount. However, comparing between the two will be a hard one. So let us see a point by point comparison between Sukanya Samriddhi Yojana (SSY) and Public Provident Fund (PPF).
The Account in case of SSY only be opened for a girl child and that too for two girls in a family (exception of third one in case of twins or triplets) however in case of PPF, the account may be opened for any individual of the family. Another restriction in case of SSY is the age bar of 10 years even in case of a girl child. Both scheme requires the similar documents for account opening and accounts may be opened with Post office or Authorized branches of Various Banks. The additional requirement in case of SSY is Birth Certificate of the girl child. In case of PPF, few private banks also offering the facility which is not there in SSY.
The Maximum deposit limits in both case of SSY and PPF stand at 1.5 lacs. Both are exempt upto contribution of 1.5 lacs per year. The mode of payment in case of SSY is cash, cheque and demand draft however additionally in case of PPF, the deposits can be made through online transfer which makes it very comfortable. The number of deposit transaction allowed in PPF in 12 however their is no such restriction in case of SSY.
The interest earned on PPF is 8.7% currently which is lower than 9.1% of SSY, both compounded annually. In both cases, the interest rates will be announced by GOI every year.
The PPF is having a maturity of 15 years that may be extended in a block of 5 years. In case of SSY, the period of investment is 21 years however it may vary with age of girl child. It matures on the date of marriage of girl child along with a withdrawal option of 50% amount at the age of 18 years. So, if a girl is just 10 years and get married at the age of 22, the maturity will stand at 12 years only. So, in case of SSY, the maturity is custom as may be the case. This is a big advantage as you may not have to wait for maturity period for your family decision.
Also, if you continue to retain account even after maturity, you will continue to earn interest however you can deposit amount only till completion of 14 year from the date of account opening.
Unlike PPF, where the account can be operated by the guardians only, in case of SSY, the account can be operated by the girl child after she attains the age of 10 years. However, the guardians can only get the account opened and deposit money unlike PPF where grand parents may also act as depositors.
Maturity or Withdrawal
In both cases the maturity or withdrawal amount is exempt from the tax. In case of you PPF you may withdraw partially or take a loan after 7 years of account opening which may not be availed in case of SSY. However, their is provision of premature withdrawal in case of death of account holder or for few specified reasons.
Though both scheme bring in the host of benefits but there is always a pros and cons of everything. Talking about Sukanya Samriddhi Scheme, it is a best suited scheme for the people who are looking to invest for the bright future for their daughters. Higher interest rates along with the flexibility in the maturity makes it ideal for the financial planning. The scheme will give you money when you need it irrespective of the maturity timings and thus you may sleep tension free. The drawback is the eligibility criteria that restricts the participation of girl child born before Dec 01, 2004 as eligible to avail this scheme. The comfort of online deposit is now the a must have and should be introduce in time to come.