The Sukanya Samriddhi and has grabbed the attention of investors, because it is pretty much an exclusive scheme for the girl child.
While the best scheme to compare would be the PPF, it is beacuse under both the schemes there is a complete tax exemption of interest income. Both the schemes also get tax benefit under Sec 80C of the Income Tax Act.
However, both the interest rates will be notified by the government on a yearly basis and it does not offer a fixed income through the life of the investment. Interest will be calculated on yearly basis by compounding method.
Now let us see some difference and similarities between the two
|Difference between Sukanya and PPF||Sukanya Account||PPF|
|Age||Girl child between 0-10 age||No Age limit|
|Where to open||Post office and nationalized banks||Post office, nationalized banks, also private banks.|
|Minimum Contribution||Rs 1,000||Rs 500|
|Interest Rate for 2014-15||9.2% per annum||8.70% per annum|
|Tax Benefit||Contributed Amount will be deductible u/s 80C.||Contributed Amount will be deductible u/s 80C|
|Tax Benefit on the interest earned||Interest Earned is tax free under PPF.||Interest Earned is tax free under PPF.|
|Maturity||21 years from the date of opening of account.||15 years from the fiscal year of opening of account.|
|Penalty||Rs 50 per year (If minimum contribution is not made)||Rs.50 per year|
|Loan||No loan can be availed||No loan can be taken from the sixth year|
|Taxation on Maturity||No tax will be levied on the maturity amount.||No tax will be levied on the maturity amount.|
|Maximum entry age limit||Only for girls aged 10 years or less from the date of birth||No age limit|
|Who can open||Only for girl Child||Anyone|
|Partial withdrawal||50% fund can be withdrawn when girl attains 18 years||Partial withdrawal is allowed from 6th year onwards.|
Both have the same tax benefit, however, if you want to choose between the two for a girl child one can consider Sukanya Samriddi account as it offers higher tax benefit than PPF.
Lock in period is high and no loan facility will only help you to save more and at the best benefit out of it.
If you are not a traditional investor, this product may not suit you as there is no online facility as of now and less liquidity compared to PPF.
Just a word of caution, which we ourselves are not clear on. What happens when the bread earning member, who used to contribute in the Sukanya Samriddhi expires and they cannot contribute say after 5 years.
There is a lock-in period that is applicable and what happens when one cannot contribute and cannot withdraw.
Perhaps, we need to study more on this guideline.