How to Save tax by investing in your Child's Name

Features of Sukanya Samriddhi Yojana

Some of the major features of Sukanya Samriddhi Yojana are mentioned below.

1. Flexible investments: Parents or guardians of a girl child can invest amounts which suit their budget, with provisions for investments ranging between Rs 1,000 and Rs 1.5 lakh per year.
2. Multiple account opening avenues: A Sukanya Samriddhi Yojana Account can be opened in either a post office or certain nationalised banks, allowing flexibility and ease of opening.
3. One account: Under the scheme, a parent/guardian can open a single account for their daughter. Multiple accounts for the same child are not allowed. A maximum of two accounts are permitted for two girl children in a family.
4. Account opening age: Parents/guardians of a girl child can open an account under this scheme till the girl reaches the age of 10 years. Accounts cannot be opened after she crosses this age.
5. Account maturity: A Sukanya Samriddhi Account matures 21 years after it is set up, with the account holder having an option to keep the account open even after maturity, in which case it continues to earn interest.
6. Account operation: The account can be operated by the girl child once she attains the age of 10 years, ensuring that the money is handled by her independently.

Benefits of Sukanya Samriddhi Yojana (SSY)

Some of the key benefits of Sukanya Samriddhi Yojana are mentioned below.

1. Tax benefits: To generate interest in this scheme, the government has offered a number of tax incentives to everyone concerned. Parents/guardians who open this account on behalf of their daughter/ward get tax excemption on their investment under Section 80C of the Income Tax Act. An additional tax benefit is provided when the girl withdraws the amount on maturity, with the entire amount exempt from tax. Any interest accrued during the period is also tax exempted, making this a triple tax benefit scheme.
2. High Interest: An account under this scheme currently earns an annual interest of 9.2% (as of 2015-2016). This is higher than traditional deposits, helping an initial investment grow over time.
3. Partial withdrawal: Partial withdrawal from the account is permitted after the girl becomes 18 years old, with 50% withdrawal allowed if she wishes to pursue higher education or decides to get married.

Eligibility and Documentation for Sukanya Samriddhi Yojana

The basic eligibility criteria in order to utilise this scheme are mentioned below.

1. Age: This account can be opened by the parent or guardian of a girl child until the time she reaches the age of 10 years.
2. One account: Only one account can be created for a girl child. Multiple accounts for the same person are not permitted.
3. Accounts per family: A maximum of two accounts can be opened by a family which has two girl children. Additional accounts cannot be opened if a family has more than 2 daughters, except if twins are born after the first daughter.
4. Indian citizen: This account can be opened only for Indian citizens, with foreigners not eligible to open this account for their daughter.

Individuals who wish to open an account for their daughter need to submit the following documents.

1. Birth certificate: A copy of the birth certificate of the girl child is necessary before an account can be opened.
2. Identity Proof: A valid ID proof of the parent/guardian who is opening the account on behalf of their daughter/ward should be submitted.
3. Proof of residence: Applicants should submit their proof of residence. This can be either a Ration card, voter's ID, utility bill, etc.

About Public Provident Fund

The National Savings Institute of the Ministry of Finance introduced Public Provident Fund (PPF) in 1968. The scheme's primary goal is to encourage small savings through good returns and income tax benefits. It helps individuals build a sizeable corpus through regular, small investments for their girl child as well as save taxes. All citizens of India including minors are eligible to open a PPF account.

A child under the age of 18 years will, however, have their parent manage their PPF account. If the minor’s father holds a separate PPF account, the total annual contribution to the father's and the child's PPF accounts must not exceed Rs.1.5 lakh. 

Features of Public Provident Fund

The features of PPF are listed below:

1. Tenure: The PPF has a 15-year lock-in period that can be increased in 5-year phases at your discretion.
2. Deposit methods: You have four options for making a deposit into a PPF account which are online fund transfer, cheque, cash, and demand draft (DD). 

1. Limit of investment: You can deposit a minimum of Rs.500 and a maximum of Rs.1.5 lakh per financial year. These contributions may be made in one large payment or up to 12 smaller payments.
2. Nomination: When opening an account or later on, you have the option of selecting a nominee for your account.
3. Partial withdrawal: Starting with the seventh fiscal year, a portion of the PPF balance may be withdrawn.
4. Joint account: It is not permitted to open a PPF account in joint names.

Benefits of Public Provident Fund

Here are some of the main benefits of PPF:

1. Low-risk investment option: Investing with low risk and guaranteed returns is one of the biggest advantages of a PPF account. The government of India backs the PPF scheme, so there's very little chance of you losing money in it.
2. Minimal investment with profitable returns: When it comes to investing, it is important to know your returns. Depending on your financial situation, you can open a PPF account with as little as Rs.500.
3. Tax benefits: Tax deductions under section 80C of the IT Act are among the tax benefits of PPF accounts. In addition to providing assured returns, investments are tax-efficient because their whole value is exempt from taxes.
4. Loan and partial withdrawal facility: Despite the 15-year lock-in period, you may obtain a loan between the third and sixth years. The loan can be availed for up to 25% of the balance that is available at the end of the two years before the year that you apply for the loan.

Eligibility and Documentation for Public Provident Fund

The eligibility conditions to open a PPF account are as follows:

1. You must be a citizen of India.
2. HUFs and NRIs cannot open a PPF account. If they already have a PPF account in their name, it will continue to be active until the completion date. However, unlike the case of Indian citizens, these accounts are not eligible for a five-year extension.
3. A single PPF account may be held by a single citizen. However, they can hold two accounts only if the second account is held in the name of a minor.

The documents required to open a PPF account are listed below:

1. Duly filled application form
2. Proof of address 
3. Nominee declaration form
4. KYC documents like Aadhaar and driving licence

1. Passport size photographs

About Equity Linked Savings Scheme

Equity Linked Savings Scheme (ELSS) is an equity fund that allocates a significant portion of its corpus to investments in equity or equity-related instruments. An ELSS fund, as its name implies, is an equity-oriented scheme that has a three-year lock-in period. To take advantage of tax benefits, many taxpayers have resorted to ELSS schemes in the recent past. Up to Rs.1.5 lakh in tax exemption on the invested amount is available to investors in ELSS schemes.

Additionally, any income you receive from this scheme at the conclusion of the three-year period will be taxed at a rate of 10% Long Term Capital Gain (LTCG) if the amount exceeds Rs.1 lakh.

Features of Equity Linked Savings Scheme

Here are the main features of ELSS:

1. Tenure: ELSS funds have a three-year lock-in period.
2. Tax benefits: Up to Rs.1.5 lakh in tax deductions is available for investments made in ELSS under section 80C.
3. Portfolio diversification: To reduce the risk of concentration, ELSS funds generally invest in a variety of equities from different industries.
4. Market-linked returns: The performance of the investment is contingent upon the performance of the underlying equities.

Benefits of Equity Linked Savings Scheme

ELSS comes with the following benefits:

1. Short lock-in period: The ELSS has the shortest lock-in duration, lasting three years. PPFs have a 15-year lock-in, whereas tax-saving fixed deposits have a five-year maturity. All things considered, ELSS provides greater liquidity than conventional tax-saving options.
2. Increased post-tax returns: LTCG from ELSS mutual funds will only be subject to 10% tax if the entire capital gains in the financial year of withdrawal is more than Rs.1 lakh.
3. Better returns: Long-term returns from investing in ELSS funds can be substantially higher than those from the majority of other tax-saving investments. ELSS funds generate wealth in addition to reducing taxes.

Documentation for Equity Linked Savings Scheme 

The following are the most frequently needed documents for ELSS funds:

1. KYC documents (Aadhaar, PAN, etc.,)
2. Duly filled application form/bank mandate
3. Postdated cheques made out to the mutual fund scheme

1. Additional paperwork as specified by that particular mutual fund scheme