Even today, parents spend more on the education and marriage of children in India. Therefore, all the parents want to invest in a scheme in which the returns are the highest. January 2015 ‘Sukanya Samriddhi Yojana’ was launched under the ‘Beti Bachao Beti Padhao’ campaign. Today it is one of the best schemes for girls. In such a situation, the question arises as to which is the most beneficial scheme in Sukanya Samriddhi Yojana and PPF.
According to experts, we should not spend all our money in Sukanya Samriddhi Yojana. Some money should be invested in public provident fund. On Sukanya Samriddhi Yojana we get an interest of 7.6 per cent, whereas the PPF will have an interest rate of only 7.1 per cent. The interest rate is revised every four months. According to financial expert Barvaraj, ‘When one has to choose between PPF and Sukanya Samriddhi Yojana, I would prefer to choose Sukanya Samriddhi Yojana. Because on this we get higher returns than PPF. Hopefully this will continue in the future as well. ‘ He said, ‘If you invest in PPF for 15 years, it will give you a better option. But that’s why one should invest a part of their earnings in PPF as well.
Under Sukanya Samriddhi Yojana, an account can be opened in the name of a girl child. We can pay by month or yearly installments. It cannot be invested after 15 years. But you will continue to get interest. Whereas the money can be withdrawn only after the girl has completed the age of 18 years. PPF and Sukanya Samriddhi Yojana get tax exemption under 80C.
Investing first For her 8-year-old daughter, she wants to consider factors such as returns, interest rates, risk involved, time horizon, investment, etc. Since Sukanya Samriddhi Yojana (SSY) and Public Provident Fund (PPF) are considered the safest investment options for investors seeking financial growth, Kavita wants to evaluate and compare the two. She knows that both these investments are eligible for tax benefits under Section 80C up to Rs 1.5 lakh per annum. However, the interest rate on SSY is usually at least 0.5% higher than PPF. She wonders if SSY is a better option.
Sukanya Samriddhi Yojana is a government-sponsored investment initiative for girls up to the age of 10. The scheme comes with a term of 21 years. Kavita will have to invest minimum amount every year for 15 years from the date of account opening to earn interest till maturity. But, in the case of SSY, his entire corpse will be locked inside him. The daughter attains the age of 18 years. In fact, even after 18 years, Kavita will be able to withdraw only 50% of the investment and the remaining amount can be withdrawn only when her daughter turns 21.
Interest offers are usually higher in the case of SSY, as it encourages parents like Kavita to make money for their daughter’s future. However, deposits can only be made up to the 15th year. No deposits are allowed between the 16th and 21st year, although the account continues to earn interest for all 21 years. Therefore, even if the fund is locked-in, investments beyond the age of 15 are prohibited which place severe constraints on the corpus’s accumulation capacity. On the other hand, PPF allows him to earn tax-free interest without any hindrance in terms of investment, has a short lock-in and allows for a longer investment horizon. These PPF features neutralize any gains in terms of compounding period of a high interest rate product such as SSY, unless the time horizon is long enough.
Therefore, Kavita’s investment decisions should not be taken by the promise of a high interest rate alone. Her relatively short investment period (7 years) may not allow her the power of compounding to adversely affect the size of her wealth. SSY would have been an ideal choice when Kavita’s daughter was younger. This would have given him a longer investment horizon and greater wealth accumulation opportunity as compared to PPF.
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