Sukanya samriddhi vs Fixed Deposit
You need to know and understand what are these two types of saving schemes are, before we move ahead to realize their differences.
(On 23 July 2018, the criteria for minimum annual deposit for the Sukanya Samriddhi Yojana account has been revised to Rs.250 from the earlier amount of Rs.1,000. Also the interest rate for the July-September quarter is 8.1%.)
What is a Fixed Deposit?
Fixed deposits (FD) are a type of deposit which can be withdrawn only post a predefined tenure and has a higher interest rate when compared to savings account. The minimum period for placing these deposit is 7 days while the maximum period is 120 months. A recent study indicates that banks are now allowed to independently determine the rate of interest to be offered on FDs. Banks may offer deposits on a floating rate, interest shall be paid on quarterly or longer rests and interest is calculated on daily balance.
What is Sukanya Samriddhi Yojana(SSY)?
The Sukanya Samriddhi account was initiated by Prime Minister Narendra Modi with the intention for parents to be able to help save and hence be able to afford their girl child’s education and marriage with financial independence, promising a great future. As of now, such an account can be opened in the post office or at certain banks in and around the country. The interest rate collected in this account as of 2015-2016 was 9.2% per annum whereas for 2014,the interest rate that was used for the account was 9.2% by the account holders. This type of account and savings product also come with maturity benefit.
Fixed Deposit Account V/s Sukanya Samriddhi Yojana
Here are the main advantages of Fixed deposit account over Sukanya Samriddhi Yojana:
- Any Indian national can open an FD in any financial institution, irrespective of their age or gender. On the other hand, Sukanya Samriddhi Account can only be opened for the girl children below the age of 10 years. Since, this is the startup year; a one year exemption on age is given under the scheme.
- The account holder can invest any amount between INR 250 to INR 1, 50, 000/- per year and all installment amount must be multiples of 100/- for Sukanya Account and if you will be unable to pay minimum amount INR 250 during one financial year then your SSY account will be discontinued and you have to pay INR 50 penalty with minimum amount to continue the SSA. If you are unable to pay minimum amount per year, then you can close you SSA. On the other hand You can invest between INR 100/- and INR 1, 50, 000/- per annum and amount should be multiples of 100/-, but no penalties may be chargeable.
- Fixed deposits require Rs. 100 of deposit amount per month to start with and SSYs require a minimum of Rs. 250.
- Field deposits can be applied for online. No online mode of operation/account opening is possible for Sukanya Samriddhi Account. At present only, post offices and Punjab National Bank are opening SSYs. There are 27 other authorized banks that are yet to start account opening and operation of Sukanya Samriddhi Scheme. The SSY can be opened in selected post office branches around the country.
- An individual can have more than one FD account in their name but in the case of SSYs only one account can be opened for a girl child, that too per family.
Here are the advantages of Sukanya Samriddhi Yojana over Fixed Deposit account:
- The parent can deposit up to 14 years and rest 7 years will be grace period and interest will be credited and the Sukanya Account will be matured in 21 years from Account opening date. The Account can be extended after 21 years also if the girl wish to do marriage later and the interest will be continuously paid by Govt. up to closing of Account. The account holder can deposit the amount once only during opening of F.D. Account and the F.D. Account will be matured after 5 years from opening of the F.D. Account. No Extension of the account is available.
- For Sukanya scheme currently the rate of interest for the financial year 2018-2019 is 8.1% & 9.2% in F.Y. 2015-16 and in F.Y. 2014-15 it was 9.1%. The Sukanya Account is linked up to 10 years Govt. Bond Yield and the rate of interest is 0.75% higher than Govt. Bond yield. All banks are having separate interest scheme for Tax saving F.D. account. For example: SBI is providing 8.5% interest for F.D. Account.
- The lock-in period for SSY is at least 21 years or at the time of marriage of the account holder, whichever is earlier. Also a partial withdrawal of up to 50% can be made from the account after 18 years for higher education of the girl child. The lock-in period for FD too is fixed and is ascertained by the bank offerings. The lock-in period of FDs can vary from 1 to 10 years, depending on the bank you are opening an account in.
- An account holder can keep investing in SSY up to a period of 14 years from the date of opening of the account. In case of FD, the investment is made one time and the returns too can be claimed only once after it matures. There is no provision for partial withdrawal.
- Premature withdrawal is possible for Sukanya Samriddhi Account but only up to 50% of the amount accumulated in the account. No premature withdrawals can be made in the case of fixed deposits.
- All deposited amount and interest and withdrawal amounts are completely exempted from Income Tax exemption u/s 80C whereas for FDs deposited amount is exempted from Tax but TDS on interest will be deducted as per section 194A or section 195.
Somehow, there is more clarity on which one is better, despite the very disadvantage of SSYs being eligible only for girl child that too till the age of 10 years only. SSY offers a higher rate of interest than FDs. Also, SSY saving is binding but yet independent in the sense that you can keep saving any amount in your girl child’s account, however, you can’t withdraw it for your petty household emergencies. This way, whatever happens around you, the future of your girl child is secure. The maturity amount in SSY is handed over only to the girl child (account holder), which means that the money would not be misused for any other purposes by anyone else. SSA also enjoys better tax exemptions.
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