Sukanya Samriddhi Yojana: the rules and who it suits

What SSY is

The Sukanya Samriddhi Yojana is a government-backed small-savings scheme for a girl child. The main rules, which you should confirm at your bank or post office before opening:

• Opened for a girl under 10 years, by a parent or legal guardian.
• Deposits of ₹250 to ₹1.5 lakh a year, for 15 years from opening.
• The account matures 21 years after opening. Deposits stop at year 15, but interest keeps accruing for the last six years.
• A partial withdrawal (up to a stated share of the balance) is allowed for education when the girl turns 18 or passes Class 10.
• The interest rate is declared by the government every quarter, so it can change over the life of the account.

The tax position

Under the old tax regime, deposits qualify for the Section 80C deduction (shared with the ₹1.5 lakh limit), the interest is tax-free and so is the maturity amount. Under the new regime there is no 80C deduction, though the exempt interest remains a reason to prefer SSY over a taxable deposit. See Section 80C options compared.

What ₹1.5 lakh a year builds

The maximum, deposited at the start of each year for 15 years (₹22.5 lakh put in), then left to compound for six more years. The rate used is an assumption, because the real rate resets quarterly.

The long tail does the work: over a third of the final sum is interest earned in the last six years, on money you have stopped adding to. That is the benefit of the 21-year design. Run your own deposits and rate in the SSY calculator.

Who it suits, and who should add more

SSY suits parents who want a guaranteed, tax-free pot for higher education or marriage and are happy to leave it alone for 21 years. It does not suit money you may need earlier, and its return is set by policy, not by the market, so it may trail equities over two decades (and may beat them over a bad stretch).

The usual answer is to split. Education costs rise faster than ordinary inflation, as the post on education cost inflation shows, so SSY alone may fall short of the goal. Use SSY for the portion that must be there, and a child education calculator to size the gap that a SIP can fill. For a wider plan, see financial planning for marriage, kids and a first home.

This post is educational, not financial advice. SSY rules and rates are set by the government and change; the rates used above are assumptions, not the current rate. Verify eligibility and limits with your bank or post office.