SSY is a government-run saving scheme for the girl child. It seeks to provide them with financial security. Roopal's daughter is eligible for an SSY account. The account must be opened before the child turns 10, with a minimum investment of Rs 1,000. Thereafter, she must invest a minimum of Rs 1,000 and a maximum of Rs 1.5 lakh (deduction available u/s 80C) annually. The money in the account can be fully withdrawn only after the girl turns 21. If the money is not withdrawn even after the girl turns 21, it will continue to earn interest.
Roopal seems to like PPF for three things—EEE tax benefit, long-term investment horizon and assured returns (notified by the Government of India), benchmarked to the prevailing market rates. All these benefits remain the same if she were to invest in SSY. However, this is where the similarities end. It is imperative that she is aware of the differences too before she makes a choice. While Roopal will be able to partially withdraw her PPF corpus from the seventh year, such partial withdrawals from SSY will be possible only after her daughter turns 18. Moreover, if she were to open the SSY account now, she would end up with an investment horizon that differs based on the age of the child, while the PPF would allow her to invest for 15 years, further extendable in blocks of 5 years. Having said that, there is a slight interest rate differential in favour of the SSY.
If Roopal's intention is to save and invest for a specific goal like her daughter's education and marriage and if intermittent liquidity is not a prerequisite, then she might be better off with SSY. However, she must bear in mind that as fixed income schemes, both SSY and PPF may not be able to generate very high inflation-beating returns. If she saves Rs 1.5 lakh for 14 years, the corpus would grow to approximately Rs 45 lakh by the time her daughter is 19, assuming current interest rates. However, the interest rates may go through their ups and downs. With an investment horizon as long as Roopal's, she could consider combining SSY with other investments, such as equity funds.
The content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta
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