Item: Sukanya Samriddhi Yojana Income Tax Benefits
Author: Muhammed Fasil K

Sukanya Samriddhi Yojana Income Tax Benefits

Introduction : Sukanya Samriddhi Yojana has been introduced vide Government of India Notification No. G.S.R.863(E) dated December 02, 2014 and circulated to Banks by Reserve Bank of India vide their letter No.RBI/2014-15/494/IDMD(DGBA).CDD/No.4052/15.02.006/2014-15 dated 11th March 2015.

Sukanya Samriddhi Yojana/Scheme is one of the most popular government schemes launched by the Indian Prime Minister, Shri. Narendra Modi. The scheme is aimed at betterment of girl child in the country. Sukanya Samriddhi scheme has been launched to offer a means of saving to the girl child in every family. The money saved via this scheme is to provide for higher education of girl and for her wedding expenses.

The Sukanya Samriddhi Scheme has got tax-free status on interest income and withdrawal in the Budget. "Investments in Sukanya Samriddhi Scheme is already eligible for deduction under Section 80C. All payments to the beneficiaries including interest payment on deposit will also be fully exempt.

Objective: To promote the welfare of Girl Child

Opening of account: The account may 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. In case of twins or triplets, this facility will be extended to the third child. Account can be opened in post offices or authorized bank branches.

Documents Required for Opening an Account

1. Birth Certificate of the girl child

2. Address and photo identity proof (PAN Card, Voter ID, Aadhar Card) of the guardian

Who can open the account: A natural/ legal guardian on behalf of a girl child

Mode of Deposit: Cash/Cheque/ Demand Draft

List of Authorized Banks for Sukanya Samriddhi Scheme

Listed below are all the authorized banks (public and private both) which have been granted permission by the Finance Ministry to officially open and maintain Sukanya Samriddhi Accounts.

· Allahabad Bank

· Andhra Bank

· Axis Bank

· Bank of Baroda (BoB)

· Bank of India (BoI)

· Bank of Maharashtra (BoM)

· Canara Bank

· Central Bank of India (CBI)

· Corporation Bank

· Dena Bank

· ICICI Bank

· IDBI Bank

· Indian Bank

· Indian Overseas Bank (IOB)

· Oriental Bank of Commerce (OBC)

· Punjab National Bank (PNB)

· Punjab & Sind Bank (PSB)

· Syndicate Bank

· UCO Bank

· Union Bank of India

· United Bank of India

· Vijaya Bank

· State Bank of India (SBI)

· State Bank of Patiala (SBP)

· State Bank of Bikaner & Jaipur (SBBJ)

· State Bank of Travancore (SBT)

· State Bank of Hyderabad (SBH)

· State Bank of Mysore (SBM)

Operation of account: The account will be opened and operated by the guardian of a girl child till the girl child, in whose name the account has been opened, attains the age of 10 years. On attaining age of 10 years, the girl child may herself operate the account.

Maximum period upto which deposits can be made: 14 years from the date of opening of the account

Maximum number of accounts: Upto two girl children or three in case of twin girls as second birth or the first birth itself results in three girl children

Age: The maximum age limit of the girl child for opening this account is 10 years. This year, a one-year relaxation has also been given.

Maturity: The 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.

Withdrawal: Up to 50 per cent of the accumulated amount can be withdrawn after the account holder turns 18.

Premature Closure: Allowed in the event of death of the depositor or in cases of extreme compassionate grounds such as medical support in life threatening diseases to be authorized by an order by the Central Government

Interest on Deposit: As notified by the GOI, compounded annually with option for monthly interest pay-outs to be calculated on balance in completed thousands.( Current rate 9.20%)

Transferability: The account may be transferred anywhere in India if the girl child shifts to a place other than the city or locality where the account stands.

Deposits: The account may be opened with an initial deposit of Rs. 1,000 and thereafter any amount in multiple of Rs. 100 can be deposited. The minimum deposit for a financial year is Rs. 1,000 and maximum Rs. 1.5 lakh. Deposits in an account can be made till completion of fourteen years, from the date of opening of the account.

Penalty: An account where minimum amount has not been deposited in a particular year will attract a fine of Rs. 50 per year.

Taxation: A contribution of up to Rs. 1.5 lakh qualifies for income taxdeduction under Section 80C of Income Tax Act. The clarifications in the Budget now make it clear that the entire maturity amount of the Sukanya Samriddhi Scheme and the interest earned are non-taxable, says Suresh Sadagopan, the founder of Ladder 7 Financial Advisories. In terms of tax treatment, it is on the lines of Public Provident Fund which also qualifies for Section 80C benefits, he says. Mr Ramesh says Sukanya Samriddhi Scheme is a good investment option to save for a girl child's future needs because the maturity amount is tax-free in the hands of the girl child. When the scheme was launched earlier this year, it was not clarified whether the withdrawal as well as interest would be exempted from tax.

The key features of Sukanya Samriddhi Yojana are summarized here under :

· Till a girl attains an age of 10 years, the Sukanya Samriddhi account yojana can be opened under her name

· Only one account under this scheme is permissible for every girl child

· Walk into any post office or authorized banks to open the account

· To open an account under SSAY, Birth Certificate of the girl child would be required to submit

· The opening amount for the account is Rs 1,000. Thereafter a multiple of Rs 100 can be deposited to the account with a minimum of Rs 1,000 per year

· The maximum limit for deposits in the account is Rs 1,50,000 per year

· You have to pay in this scheme for 14 years. Suppose you have opened this account when the age of your girl child was X years then you have to pay in this scheme till your girl child age is X +14 years.

· The maturity duration of the account is 21 years from the date of opening the account.

· Sukanya Samriddhi Account is transferrable to anywhere in India from a Post office or bank to others

Disadvantages or Shortcomings of Sukanya Samriddhi Scheme/Yojana

Apart from the various great features and benefits that the scheme offers, there are a few drawbacks associated with the scheme which may deter some if not many users. Like all financial schemes in the market there are pluses and minuses with Sukanya Samriddhi scheme too. However, experts are of the view that the number of advantages of the scheme surely outnumber the disadvantages of this scheme. Listed below are a few of these drawbacks that have been talked about by industry experts.

· The lock-in period of the deposit amount is quite long as compared to other financial products currently in the market

· The scheme can be availed by any parent or guardian for a maximum of number of two girl child. So if a couple has 3 or more daughters, the benefit cannot be availed for all.

· The scheme does not offer the facility of online submission of amount and hence can prove taxing to tech-savvy individuals. Deposits to the account can be made either via cheque or cash or demand draft only

· The rate of interest being offered currently is not fixed and is to be revised every year in the month of April. Experts are of the view that the rate may dwindle in future since currently the scheme has been in the launch phase and hence higher rate of interest is being offered to popularize it among citizens

· Deposits made under Sukanya Samriddhi Account do not offer the added benefit of availing loan against them.

E-book on draft resolutions and procedures

Sukanya Samriddhi Yojana Income Tax Benefits