In an eagerly awaited announcement, the Union Government has decided to keep the Sukanya Samriddhi Yojana (SSY) interest rate unchanged for the July-September quarter of the financial year 2023-24. Speculations were rife among SSY account holders regarding a possible hike in the interest rate, but the government’s decision has put those expectations to rest. Let’s delve deeper into the details of this development.
Eligibility Criteria for Sukanya Samriddhi Yojana
The eligibility criteria for Sukanya Samriddhi Yojana are as follows:
- The account can be opened by the natural or legal guardian of a girl child who is a resident Indian.
- The account can be opened for a maximum of two girl children per family. In case of twins or triplets, an exception can be made.
- The account can be opened from the birth of the girl child till she attains the age of 10 years.
- The minimum deposit amount is Rs. 250 and the maximum deposit amount is Rs. 1.5 lakh in a financial year.
- The deposits can be made in lump sum or in installments, but not more than 12 installments in a year.
- The deposits can be made in cash, cheque, demand draft or online transfer.
Benefits of Sukanya Samriddhi Yojana
The benefits of Sukanya Samriddhi Yojana are as follows:
- The scheme offers a high interest rate of 7.6% per annum, which is compounded annually and credited to the account at the end of each financial year.
- The scheme offers tax benefits under Section 80C of the Income Tax Act, 1961. The deposits, interest and maturity amount are exempt from tax.
- The scheme offers maturity benefits after the completion of 21 years from the date of opening of the account or after the marriage of the girl child, whichever is earlier. The maturity amount can be withdrawn by the girl child herself after attaining the age of 18 years or after passing the 10th standard examination, whichever is earlier.
- The scheme also offers partial withdrawal facility up to 50% of the balance at the end of the preceding financial year for the purpose of higher education or marriage of the girl child after attaining the age of 18 years or after passing the 10th standard examination, whichever is earlier.
- The scheme also offers premature closure facility in case of death of the account holder or in case of extreme compassionate grounds such as medical emergency, as per the rules.
Stability in SSY Interest Rate
The SSY interest rate for the previous quarter (April-June 2023) witnessed an upward revision, reaching 8.2%. However, the current announcement confirms that the interest rate will remain steady at 8% for the July-September 2023 period. While some account holders were hoping for a further increase, experts predicted that the rate would remain unchanged considering the recent revisions and economic factors.
Key Features of SSY
The Sukanya Samriddhi Yojana is a popular savings scheme designed for the benefit of minor girls aged 1-10 years. Under this scheme, parents or legal guardians can open an account in the name of the girl child and contribute a maximum of Rs 1.5 lakh annually. Contributions to the SSY account are eligible for tax deductions under Section 80C of the Income Tax Act, making it an attractive investment option for many.
Tax Benefits and Exempted Interest
One of the significant advantages of the SSY account is the tax benefits it offers. Apart from the tax deductions on contributions, the interest earned from the account is also tax-free. This makes the SSY a compelling choice for parents who wish to secure their daughter’s future while maximizing their tax savings.
Impact of Small Savings Scheme Revisions
Over the past six months, the Finance Ministry has reviewed and revised interest rates for various small savings schemes, including the SSY account. However, it’s worth noting that the interest rate for the Public Provident Fund (PPF) has remained unchanged amidst these adjustments. The revisions in interest rates are influenced by factors such as government securities yields and overall economic conditions.
Government Securities Linkage
The interest rates of small savings schemes, including the SSY account, are closely linked to the yields of government securities (G-Secs). The Finance Ministry undertakes a quarterly review of these rates, considering the G-Secs yields of the preceding three months. As the interest rates of most small savings schemes are already competitive with fixed deposit rates offered by banks, the scope for further upward revisions in the SSY interest rate is limited.
RBI’s Repo Rate and Inflation Outlook
While the Reserve Bank of India (RBI) had previously raised the repo rate by 2.5% since May 2022, the central bank has currently paused any further rate hikes. Additionally, the prevailing low inflation levels further dampen the possibility of an upward revision in the SSY interest rate. Economic experts believe that these factors have contributed to the government’s decision to maintain the current interest rate.
The Union Government’s decision to keep the Sukanya Samriddhi Yojana (SSY) interest rate unchanged for the July-September 2023 quarter brings a sense of stability to account holders. While hopes for an increase may have been dashed, the SSY account remains an attractive long-term investment option for parents seeking financial security for their daughters. With its tax benefits and exempted interest, the SSY scheme continues to serve as a valuable tool for securing the future of young girls across the country.
