There have been minor amendments made to the Sukanya Samriddhi Scheme rules. The revised rules build upon the original rules and provide better clarity in many areas including deposits, withdrawals and closure rules. In this post, I will discuss such changes.
Must Read: Sukanya Samriddhi Scheme: Revisited
To note: In March, 2016, the interest rate for Sukanya Samriddhi Scheme was changed to 8.6% p.a. (from 9.2% p.a.). Let’s look at some of the amendments.
The SSY account can be opened and operated only in the name of a Resident girl child
The account can only be opened in the name of a girl child (beneficiary or account holder), who is a resident Indian. Do note parents can be non-residents. The account cannot be opened in the name of NRI girl child.
The account must be closed if the beneficiary (girl child) becomes a non-resident. As I understand, the definition of non-resident should be as per FEMA (and not Income Tax Act). The change in residential status shall be intimated to post office/bank within 1 month of such change.
As per FEMA, you become a non-resident the day you go abroad for studies. So, you must keep these aspects in mind.
Even if you don’t intimate the status to post office/bank, the account will be deemed closed from the date of change in residential status. No interest shall accrue to such account. If any interest has been credited to the account post such change, it will be clawed back.
The account can also be opened in the name of adopted girl child. Not that it was not allowed earlier. The new rules explicitly permit for opening of account of adopted girl child too.
Deposit Rules
Deposits to the account can now be made till the completion of 15 years (earlier 14 years) from the date of opening the account.
If you have accidentally or deliberately deposits more than Rs 1.5 lacs per financial year in a SSY account, the excess amount won’t earn any interest. The excess amount can be withdrawn anytime by the depositor.
If you do not make minimum contribution (Rs 1,000) in a particular financial year, your account (your daughter’s account) shall be considered under default. You can regularize the account by paying a penalty of Rs 50 per year and the minimum contribution amount for number of years in default.
Here comes the blow. If you don’t regularize the account within 15 years of opening account, you shall be eligible for only Post Office Savings Account rate (4% p.a.) at the time of maturity. Interest credited (at higher rate) will be reverted to Government Account. It is a good move. This is to ensure that you make regular deposits in the account. This rule shall not apply if the default occurred because of death of guardian of the account holder.
Credit of Interest
The interest shall be calculated on the lowest balance between 10th and the last day of the month. So essentially, you should deposit on or before 10th of every month to maximize returns. Won’t impact returns too much though.
Partial Withdrawal
You can withdraw up to 50% of the account balance at the end of previous financial year for the purpose of higher education of the beneficiary (girl). This is allowed only when the girl child turns 18 or has passed 10th standard, whichever is earlier. Under the old rules, this was allowed only once the girl child turned 18. Higher education is not defined. I assume it means education beyond 10th standard.
This is a good move as most children will complete their 10th standard before they turn 18. In any case, linking the withdrawal for higher education to the age of the child was not a wise move.
The withdrawal can be made in lump sum or in installments. In case you choose to withdraw in installments, you can withdraw in up to five installments, not exceeding one installment per year. The installments need not be equal.
Closure on Maturity
The Account matures on completion on 21 years from the date of opening SSY account. No interest shall be payable once the Account completes 21 years. Under the old rules, there was not much clarity. Hence, your daughter must withdraw money from the account once the account completes 21 years.
Premature closure (before completion of 21 years) is allowed if the beneficiary (girl) intends to get married. Such application for premature closure cannot be made unless the beneficiary turns 18.
Such application for premature closure shall be made at least a month before the date of marriage or within 3 months from the date of marriage.
By the way, there is no mention of what is an acceptable proof on intention to get married.
This is a realistic move. If you are saving in SSY account for your daughter’s marriage, you should be able to take money out before marriage.
Under the old rules, the account had to be closed on completion of 21 years or the date of beneficiary’s marriage, whichever was earlier.
The amount of withdrawal is capped at actual demand of fee and other charges required at the time of admission. This should be as per offer of admission or fee-slip issued by the education institution.
PersonalFinancePlan Take
The new rules provide better clarity and also have a more realistic approach to the needs of a girl child.
Should you invest in Sukanya Samriddhi Account for your daughter?
You can. I prefer PPF (especially of you are talking about a new born girl) over SSY because it provides much better flexibility as compared to SSY account (even though it offers a lower interest rate). PPF account can be continued even beyond the marriage of the girl (beneficiary). PPF account becomes extremely flexible after initial maturity of 15 years.
Read: Why you should open PPF account for your children?
On the other hand, if your daughter is 8 years old, you are better off opening SSY account especially if you are saving for her education since the PPF account will mature in 15 years only. Premature withdrawal rules for PPF are nothing to rave about.
In fact, you can take exposure to both PPF and SSY. It is not a crisp choice. You must make an informed decision. PPF and SSY can form an integral part of debt portfolio for your daughter’s education and marriage.
And yes, don’t forget equity mutual funds. Since your daughter’s education and marriage is quite some time away, you must take exposure to equities too.
Reference:
Sukanya Samriddhi Account Rules, 2016
