Saving for the future is indispensable, whether for retirement, your child’s schooling, or other long-term goals. The Indian government offers several safe and reliable investment schemes that can help grow wealth and achieve one’s savings goals. The right selection of the best alternative requires deep research and comprehensive analysis, which demand our valuable effort. When choosing among these options, one must take into account multiple factors like financial goals, risk appetite, interest rates as well as flexibility.
Sukanya Samriddhi Yojana (SSY) accounts and the Public Provident Fund (PPF) are among the safest investments backed by the Indian government. These investment options are readily available to investors looking for substantial financial growth with a minimum level of risk. Moreover, both have their own unique features, although they still provide lucrative returns along with tax advantages.
Understanding Sukanya Samriddhi Yojana (SSY)
In a bid to address the declining child sex ratio in our country, the Government of India introduced the Beti Bachao Beti Padhao (BBBP) campaign on January 22, 2015. The message of this social campaign is ‘Save girls, educate the girl child’ by providing a dedicated savings platform for their education and marriage expenses. This is a national initiative undertaken in partnership with the Ministry of Women and Child Development, the Ministry of Health and Family Welfare, and the Ministry of Human Resource Development to promote the welfare of girl children. Post offices across the country recorded about 11 lakh Sukanya Samriddhi accounts in 2023, which stood at 1/3rd of the average annual tally.
Key Features of Sukanya Samriddhi Yojana
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Sukanya Samriddhi Yojana has several key features that make it an attractive investment choice for parents having a girl child.
Account opening and eligibility:
Parents or lawful guardians have the privilege to open an SSY account for any girl child aged below 10. One family can have no more than two accounts for two daughters. In the case of twin girls as a second birth or if the first birth itself results in three girl children, parents may apply for an additional account.
Investment and returns:
The minimum deposit that can be made for the SSY scheme annually is INR 250, whereas the maximum limit that can be set in a financial year is INR 1.5 lakh. This scheme has one of the highest interest rates when compared to any other savings schemes backed by the government, which are changed every three months. The last quarter interest rate for 2023-24 stands at 8.2%, compounded annually.
Maturity and withdrawal:
An SSY account will become mature 21 years after it has been opened or when the girl child gets married at or above 18 years old, whichever comes first. After that, partial withdrawals of up to 50% of the balance are allowed after she reaches 18 years for higher education or marriage purposes.
Tax benefits:
Under the provisions of Section 80C of the Income Tax Act, 1961, investments made in SSY are eligible for tax deduction. Moreover, this triple tax benefit scheme offers a zero-income tax facility on which both interest earned and maturity amount are exempt from taxation.
Exploring Public Provident Fund (PPF)
Public Provident Fund, popularly known as PPF, was introduced in 1968 to motivate individuals to save for their long-term objectives while enjoying tax benefits. It is among the most preferred government savings schemes in India accessible to citizens. Any Indian citizen can open a PPF account at bank branches or post offices with a minimum amount of INR 500. It is a long-term savings plan that promises a trustworthy interest rate which makes it an ideal preference for those who do not like risks but want to accumulate wealth within a time frame.
The PPF stands out by providing every person with safety, decent interest rates, and tax-saving prospects under Section 80C, thus enabling them to build up retirement funds or achieve other long-term financial objectives. Notably, NRIs do not qualify to open new accounts under this scheme. However, if an individual turns into an NRI after having opened a PPF account, he/she may still contribute towards it until the maturity period but cannot extend its tenure.
A Deep Dive Into The Essential Features of PPF
The Public Provident Fund is a flexible and secure savings instrument that offers a range of features designed to promote disciplined investment.
Account opening and eligibility:
In India, any resident, including minors, is eligible to get a PPF savings account. However, an individual can only open one PPF account in her or his name except for accounts opened on behalf of minors.
Investment and returns:
The minimum amount that can be deposited every year in a PPF account is INR 500, and the maximum limit per financial year is INR 1.5 lakh. Just like SSY, PPF has truly attractive interest rates that are revised quarterly. For example, during the fiscal year’s Q2 (2023-2024), the interest rate for this account was 7.1 percent compounded annually.
Maturity and withdrawal:
Once you open your PPF account, it will mature after 15 years, but you may withdraw partially from it after 5 years if you meet certain conditions.
Tax benefits:
Public Provident Funds are similar to SSY investments, which qualify for tax deduction under Section 80C of the Income Tax Act. As an EEE (Exempt-Exempt-Exempt) scheme, it provides a triple tax advantage and is designed so that the interest earned and the maturity value are free from taxes.
Differences between PPF and Sukanya Samriddhi Yojana
Below is a table differentiating between Sukanya Samriddhi Yojana and the Public Provident Fund for better understanding:
| Parameter | Sukanya Samriddhi Yojana (SSY) | Public Provident Fund (PPF) |
| Eligibility | Only for girl children up to 10 years old | Any Indian resident, including minors |
| Account holder | Parents or legal guardians on behalf of the girl child | Self or on behalf of minors |
| Entry age | Birth | 15 years |
| Tenure | 21 years from account opening or until marriage after 18 years | 15 years initially extendable in 5-year blocks |
| Interest rate (as of Q4 2023-24) | 8.2% p.a. | 7.1% p.a. |
| Minimum annual deposit | INR 250 | INR 500 |
| Maximum annual deposit | INR 1.5 lakh | INR 1.5 lakh |
| Premature withdrawal | Allowed for higher education after the girl turns 18 | Allowed post-completion of 5 years from the account’s opening date |
| Interest rate | Typically higher than PPF, revised quarterly | Revised quarterly |
| Loan facility | Not available | Available |
| Nomination facility | Not available | Available |
The Sukanya Samriddhi Yojana, as well as the Public Provident Fund, are excellent government-sponsored savings schemes that offer competitive returns and tax advantages. The SSY serves the unique purpose of providing for girl children’s future finances, whereas PPF is a more versatile long-term savings option. The choice between them relies on personal circumstances, financial objectives and preferences in investing. By examining different features, advantages, or shortcomings of both plans carefully, investors can decide what best suits his/her financial planning needs.
