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  • Sukanya Samriddhi vs Recurring Deposit

    Sukanya Samriddhi vs Recurring Deposit

    You need to know and understand what are these two types of saving schemes are, before we move ahead to realize their differences.

    What is Recurring Deposit Account?

    Recurring Deposits are term deposits that help you plan for future needs. It enables people with regular income to make a financial provision for themselves by investing a small amount on a regular basis for a predetermined period and earn interest as high as fixed deposits. When the deposit matures, you are paid back the lump sum including the principal and accumulated interest. The interest rates of banking products are subject to change, but once you have invested in an RD the interest rate remains same throughout the term.

    What is Sukanya Samriddhi Yojana?

    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 is 9.2% per annum whereas last year the interest 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.

    Recurring Deposit Account V/s Sukanya Samriddhi Yojana

    Here are the main advantages of Recurring deposit account over Sukanya Samriddhi Yojana:

    1. Recurring deposit accounts can be opened by anyone as long as they are Indian or a non-residential Indian whereas an SSY can be only opened for a girl child who has be 10 years or below to be eligible for the account.
    2. 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.
    3. Recurring deposits require Rs. 100 of deposit amount per month to start with and SSYs require a minimum of Rs. 1,000.
    4. There is no maximum investment amount on recurring deposits, whereas the maximum investment amount for SSY is Rs. 1,50,000.
    5. You can prematurely withdraw only half the deposit amount when the girl turns 18 years of age whereas in the case of RDs the whole amount can be withdrawn with 1% penalty payable.
    6. In Recurring Deposit you can take loan upto 90% of the amount deposited, however in the case of SSY you don’t have any loan facility.

    Here are the advantages of Sukanya Samriddhi Yojana over Recurring Deposit account:

    1. The interest earned in on SSY is 9.2% whereas in recurring deposit, the interest earned is only 8.40% p.a. for 1 to 5 years Recurring Deposit.
    2. SSY can be opened in post offices and 28 listed banks which is the same for recurring deposit, except an NRI can only open a recurring deposit at a bank.
    3. Sukanya Samriddhi Yojana has a fix tenure of 21 years or when getting married whereas in recurring Deposit minimum tenure is 6 month and maximum is 10 years.
    4. SSY is a long term debt scheme whereas recurring deposits are short term debt schemes.
    5. SSY are generally for larger expenditure of an girl child such as wedding or education whereas a recurring fixed deposit can be used for anything including buying a car or travelling for a holiday abroad.
    6. For any default in payments in SSY only Rs. 50 is payable in a year, whereas in the case of recurring deposits Rs.1.50 to Rs.2 is payable for every Rs.100 per month.
    7. In Sukanya Samriddhi Yojana the interest is calculated and compounded yearly whereas in recurring it is calculated compounded monthly.
    8. Tax exemption on TDS, interest and amount is completely tax free under Section 80C of the Income Tax Act of 1961. In the case of recurring deposits only if the account belongs to minor then deduction of Rs.1,500 from the total interest u/s 10(32) can be claimed, rest all other amounts are taxable.

    Conclusion:

    It is clearly evident from the above comparison that Sukanya Samriddhi Account has a upper-hand in many ways when it comes to a saving scheme and interest earned. However, it is only beneficial for a girl child, hence restricting the advantages to only a portion of the public, which most may not have access to. Also 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.

    Recurring Deposit - Sitemap
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