For those who are conservative investors, the best option of investment is to choose from a government scheme for your child’s future.
The government operates several schemes for children, especially for the girl child. The central government introduced the Sukankya Samriddhi Yojana in 2015, a savings scheme as a part of the ‘Beti Bachao Beti Padhao’ campaign.
This type of account can be opened any time before the girl child turns 10 years old. Under Sukankya Samriddhi scheme, a minimum of Rs 1,000 and a maximum of Rs 1,50,000 can be deposited in a year. This scheme has multiple benefits:
- High interest rate: Sukanya Samriddhi Yojana interest rate is the highest at 8.6% as compared to any other savings account. This interest rate is for the current financial year. The government changes the rates every year. Interest is compounded yearly and also credited in the account yearly.
- Income tax exemption: The contribution made to this account is exempted from income tax under Section 80 of the Income Tax Act. The exemption is available on the interest as well as at the time of withdrawal. This scheme is said to be the most tax efficient one. It falls under the authority of Department of Revenue (DOR).
- Lock-in period: This is one of the striking features of this scheme. The lock-in period, from the time of opening the account, to when the girl child reaches 21 years of age or at the marriage of the girl, whichever is earlier. The account cannot be operated once the girl is married. The funds can be withdrawn prematurely, at the age of 18 years, if the money is needed for higher education. In this case, only 50% of the account balance can be withdrawn. Money can be deposited for up to 14 years after the account is opened.
- Maturity benefits: When the account reaches maturity, the amount including the interest will be paid to the policyholder i.e. the girl child. Sukanya Samriddhi Yojana benefits kids as it acts as an efficient tool to provide financial independence to the girl child thus empowering them.
- Interest after maturity: A unique feature is that interest is paid to the policyholder even once the scheme reaches maturity. It goes on paying interest until the account is finally closed.
When saving for your child, parents usually keep a major portion of their savings aside by investing in equities. But when it comes to the Sukanya Samriddhi Account, only a small amount has to be deposited and it reaps benefits in the long run. The high interest rate can guarantee sufficient corpus to secure a bright future for your child.