The recently launched
Sukanya Samriddhi Account (SSA) and Public Provident Fund (PPF) can be
useful instruments for saving for the future needs of the children. The
Sukanya Samriddhi Account can only be opened in the name of the girl
child while PPF scheme can be availed by all. Experts say PPF scores
over Sukanya Samriddhi Account in terms of liquidity (partial withdrawal
facility) and other flexibilities. But Sukanya Samriddhi Account could
potentially give higher returns, they add.
Eligibility: A
Sukanya Samriddhi Account can be opened by the guardian in the name of a
girl child till she attains the age of ten years. Only one account is
allowed per girl child. Parents can open this account for a maximum of
two children.
Limit: An investor can open PPF accounts in the name of minors but a maximum of Rs.
1.5 lakh can be deposited every year including all the accounts. In
case of Sukanya Samriddhi Account, a maximum of Rs 1.5 lakh can be
deposited per account.
Account Opening: A Sukanya Samriddhi Account can be opened with an amount of Rs.
1,000 while it is Rs 100 for a PPF account. Both these accounts can be opened at post offices and banks.
A charge of Rs 50 will be levied both in Sukanya Samriddhi Account and PPF if the minimum contribution is not made every year.
Minimum and maximum contribution:
In an Sukanya Samriddhi Account, a minimum of Rs. 1,000 has to be
deposited every year and the maximum limit is Rs. 1.5 lakh. And there is
no limit on number of deposits either in a month or in a financial
year.
In case of PPF, an
individual but has to deposit a minimum of Rs. 500 in a financial year
while the maximum limit is Rs.1,50,000. And deposits can be made in
lump-sum or in 12 installments.
Maturity: The
Sukanya Samriddhi Account can be closed after the girl child in whose
name the account was opened completes the age of 21. If account is not
closed after maturity, the balance will continue to earn interest as
specified for the scheme from time to time. The maturity period of a PPF
account is 15 years but it can be extended in blocks of five years.
Taxation: In
terms for taxation, deduction up to Rs. 1.5 lakh is allowed under
Section 80C in both the Sukanya Samriddhi Account and PPF. Also, both
the schemes qualify for tax-free status on withdrawal and interest
income.
Withdrawal:
Partial withdrawal is permissible every year from the seventh financial
year of opening the PPF account. In case of Sukanya Samriddhi Account,
up to 50 per cent of the accumulated amount can be withdrawn after the
account holder turns 18 while full withdrawal is possible after she
turns 21.
Interest rate:
The interest rate on Sukanya Samriddhi Account and PPF is not fixed. The
government will every year declare the interest rate of the scheme. For
2014-15, the government would be paying 9.1 per cent interest on
Sukanya Samriddhi Account against 8.7 per cent on PPF.
Loan: A loan facility is available from the third financial year
of opening the PPF account. In Sukanya Samriddhi Account there is no
such facility.
What Experts Say: Anil Rego, CEO of Right Horizons, a wealth
management firm, said the choice between Sukanya Samriddhi Account and
PPF is a trade-off between more flexibility and higher returns. PPF
offers more flexibility while Sukanya Samriddhi Account can potentially
give higher returns, he added. Investors with surpluses can look at the
distributing their investments in both the schemes, Mr Rego added.
Suresh Sadagopan, the
founder of Ladder 7 Financial Advisories, says both the Sukanya
Samriddhi Account and PPF are similar schemes in nature in the debt
space under Section 80C. The Sukanya Samriddhi Account is a good
alternative if investors are comfortable at locking their money for a
long time, he added.
Source : NDTV
