Investing for daughter: Should you opt for Sukanya Samriddhi Yojana or PPF?

A Sukanya Samriddhi Account can be opened any time after the birth of a girl child till she turns 10, where you will have to deposit a minimum of Rs 250. In subsequent years, a minimum of Rs 250 and a maximum of Rs 1.5 lakh can be deposited during the ongoing financial year.

The account will remain operative for 21 years from the date of its opening or till the marriage of the girl after she turns 18. To meet the requirement of the child's higher education expenses, partial withdrawal of 50 per cent of the balance is allowed after she turns 18.

You can only open and operate one account in the name of the girl child. You can't open two accounts for one girl. The parents or legal guardians of a girl child (up to 10 years old) can open this account with a notified bank or post office in the name of the girl.

The birth certificate of the girl in whose name the account is opened should be submitted by the guardian at the time of the opening of the account in the post office or bank, along with other documents relating to identity and residence proof of the depositor.

To keep the account active, a minimum contribution of Rs 250 is mandatory in each financial year (and in multiples of Rs 100 thereafter). Maximum investment allowed per annum under the Sukanya Samriddhi Yojana is Rs 1.5 lakh up to the end of 15th year from the opening of the account.

A Sukanya Samriddhi account can become a default account if the minimum deposit is not made in a financial year. The account in default can be revived before the completion of 15 years from the date of opening of the account by paying the minimum deposit amount, i.e., Rs 250 plus penalty amount of Rs 50 for each year of default.

If the penalty is not paid, the entire deposit, including those made before the date of default, will receive interest at post office savings bank account rate.

The government fixes interest rates on small savings and post office schemes a quarterly basis, SSY falls under this category and thus, interest rates are announced quarterly, based on government securities (G-sec) yields.

The SSY enjoys a exempt-exempt-exempt (EEE) status. The annual deposit (contributions) qualifies for Section 80C benefit and the maturity benefits are non-taxable.

When she turns 10, the girl child whose name the account has been opened in can operate the account herself, however, deposit in the account has to be made by the guardian or any other person or authority.

The Sukanya Samriddhi account will mature after 21 years from the date of opening of the account or at the time of marriage of the girl child after attaining age of 18 years (1 month before or 3 months after date of marriage).

In the event of death of the account holder, the account will be closed immediately on the production of a death certificate. The balance in the account will be paid, along with the interest till the month preceding the month of the premature closure of the account, to the guardian of the account holder.

In any other case, a request for the premature closure of an SSY account can be put forward after the completion of five years of the account opening. This too will be allowed, as per the rules, on extreme compassionate grounds such as medical support in life-threatening diseases. Still, if the account has to be closed for another reason, it will be allowed, but the entire deposit will only get interest of a Post Office Savings Bank account.

The account can be transferred anywhere in India if the girl child in whose name the account has been opened shifts to a place other than the city. A transfer request must be filled and one needs to visit their bank/post office branch with the passbook.

The transfer is free of cost up on furnishing proof of shifting of residence of either the parent/guardian or account holder. If no such proof is submitted, then the applicant will have to pay Rs 100 to the post office or the bank to which the transfer is made.