What are the Tax Benefits of Sukanya Samriddhi Yojana (SSY)?
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What are the Tax Benefits of Sukanya Samriddhi Yojana (SSY)?

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What are the Tax Benefits of Sukanya Samriddhi Yojana (SSY)?

Amidst the decline in the child sex ratio and rise in female foeticide, the Government of India launched a campaign called ‘Beti Bachao Beti Padhao’ in 2015. The purpose of this initiative was to encourage gender equality and women empowerment. To promote this initiative, investment options like Sukanya Samriddhi Yojana (SSY) have been introduced.

The SSY scheme is crafted for the parents of a girl child. With this Yojana, the parents can secure the future of their girl child by systematically investing a portion of their savings. This account matures after 21 years or until the female child turns 18 and gets married.

Let us have a look at what is SSY and what are the features and benefits of Sukanya Samriddhi Yojana?

What is Sukanya Samriddhi Yojana?

SSY stands for Sukanya Samriddhi Yojana. It is a deposit scheme started by the Government of India to save funds for the education and marriage of a girl child. This program was initiated keeping in mind the decline in the sex ratio in the country.

This Government scheme is aimed at encouraging parents to build a bright future for their girl child. Upon maturity of the SSY accounts, the parents of the girl child or the guardian can withdraw those funds to provide better education for that child and to bear the expense of her marriage.

When can one open an SSY account?

An SSY account can be opened at any time following a girl’s birth until she reaches the age of ten, with a minimum deposit of ₹250. This account can be with any bank and/or post office.

Parents can claim tax benefit of up to ₹1.5 lakh made towards the scheme under the Section 80C of the Income Tax Act,1961. A minimum of ₹250 and a maximum of ₹1.5 lakh can be placed in later years throughout the ongoing fiscal year. The account will be active for 21 years from the date of its opening, or until the girl turns 18 and gets married. Once the child turns 18, a partial withdrawal of 50% of the balance is permitted to meet the need for the child’s higher education expenses.

What are the tax benefits of Sukanya Samriddhi Yojana (SSY)

What rules need to be followed?

For a girl child, you can only open and run only one SSY account. Two accounts for the same girl child cannot be opened. Parents or legal guardians of the female child (under the age of ten) can open an account in her name at a recognized bank or post office. The guardian should send the birth certificate of the girl in whose name the account is opened, along with additional documentation proving the depositor’s identity and domicile, to the post office or bank when the account is opened.

Documents required for an SSY account:

  • The birth certificate of the girl child is mandatory.
  • SSY account opening form
  • The address proof and ID proof of the depositor is required
  • If multiple children are born under one order of birth, then a medical certificate is also needed.
  • Any other documents requested by the bank or post office for opening an SSY account.

Steps to open an SSY account:

  • Submit an application form of SSY in the nearest bank or post office.
  • Attach all the required documents with the application form.
  • You can pay your first deposit for the SSY account. The amount can range from ₹250 to ₹1,50,000.
  • As soon as the bank or the post office verifies all your details, the SSY account is successfully opened.
  • Once the account is opened, you will also get a passbook to track all your transactions.

Sukanya Samriddhi Yojana Tax Benefits

There are several benefits of Sukanya Samriddhi Yojana for parents and tax benefits that one can avail by investing in such a financial tool.

1. A maximum of ₹1,50,000 per year can be claimed as per SSY tax benefits under Section 80C of the Income Tax Act.

2. The interest earned on the deposited amount is tax-free.

3.The amount received on maturity is also tax-free.

4. SSY investment is a EEE (Exempt, Exempt, Exempt) investment. This means that the amount invested, and the interest generated, both are non-taxable.

Tax Deduction Eligibility Criteria

The parent or guardian of the girl child is eligible for opening an SSY account only if the girl is below the age of 10 years. In case the girl child is above the age of 10, the parents cannot open an account.

Things to Remember:

  • Deposition limit in SSY

A minimum of ₹250 and a maximum of ₹1,50,000 per year can be deposited in the SSY account.

  • Operator of the SSY account

After completion of 18 years of age, only the girl shall operate the account.

  • Eligibility Criteria for SSY

The girl child should be a resident of India.

The girl child should be below the age of 10 years to be eligible for opening an SSY account.

If the girl child is below 10 years of age, her parents or guardians can open an SSY account on behalf of her.

  • Number of SSY accounts

Parents can open a maximum of two accounts for their two girl children. A third account may be allowed in the case of twins during the first or second birth.

  • In case of no deposits

If no funds have been deposited, the account can be regularized with a penalty of ₹50 per year. The terms and conditions of the scheme have been kept flexible, so that the people from all economic status can enjoy the benefits of Sukanya Samriddhi Yojana.

  • Tenure of the SSY account

Deposits have to be made for 15 years only and the account matures after 21 years from the date of opening the account.

  • Premature withdrawal

Premature withdrawal is allowed after 5 years of maintaining the account in case the parent or guardian passes away or due to other reasons like marriage.

  • Premature closure of SSY account

Premature closure is allowed in case of marriage of the girl after attaining the legal age of 18 years. Other reasons like a medical emergency or financial burden on the girl child also allow premature closure of the SSY account.

What happens if the minimum amount is not deposited in an SSY Account?

If the necessary deposit is not made in a fiscal year, a Sukanya Samriddhi account might become a default account. The account can be reactivated before the end of the 15-year period from the date of opening by paying the required contribution of ₹250 plus a penalty of ₹50 for each year of delay. If the penalty is not paid, the entire deposit, including those made before the default date, will earn interest at the rate of a post office savings bank account.

What if an excess amount is paid in an SSY account?

If the deposit is above ₹1,50,000, no interest is generated. However, the excess amount can be withdrawn by the depositor at any point of time from the SSY account.

Can the SSY account be transferred?

If the girl child in whose name the account was opened moves out of the city, the account can be transferred anywhere in India. For this, a transfer request must be completed, and the passbook must be brought to the bank or post office branch. This transfer is free of charge if proof of residency change is provided by either the parent/guardian or account owner. If no such proof is provided, the applicant will be required to pay a fee of ₹100 to the post office or bank where the transfer was completed.

Conclusion

Sukanya Samriddhi is regulated by the central government and is available in every state of the country. It is a government-backed scheme and provides guaranteed returns with a high-interest rate. Sukanya Samriddhi Yojana’s tax benefits and flexible terms make it extremely useful and easy to avail. This scheme provides financial support to the parents to meet expenses like education and the marriage of their female child; thus encouraging the parents to raise their beloved daughter and give her a bright future.

- A Consumer Education Initiative series by Kotak Life

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