Investment in Sukanya Samriddhi Scheme has got tax-free status on interest income and withdrawal in the Budget. The Sukanya Samriddhi Scheme is a small savings scheme which was launched in January this year and is aimed at encouraging savings for a girl child's education and marriage.
Taxation: A contribution of up to Rs 1.5 lakh qualifies for income tax deduction under Section 80C of Income Tax Act. All payments to the beneficiaries including interest payment on deposit will also be fully exempt, Finance Minister Arun Jaitley said in his Budget Speech.
Interest rate: For 2014-15, the government would be paying 9.1 per cent interest. The government will every year declare the interest rate of the scheme.
How It Compares With PPF: The interest rate on public provident fund (PPF) is also announced every year. For 2014-15, the government will pay 8.70 per cent. PPF also enjoys tax-free-status on interest income and withdrawal. Another small savings scheme national savings certificate (NSC) however does not enjoy tax-free status on interest income. (Also read: Income Tax Rules Tightened on PF Withdrawals)
What Experts Say: The clarifications in the Budget now make it clear that the entire maturity amount of the Sukanya Samriddhi Scheme and the interest earned are non-taxable, says Suresh Sadagopan, the founder of Ladder 7 Financial Advisories. Mr Ramesh says Sukanya Samriddhi Scheme is a good investment option to save for a girl child's future needs because the maturity amount is tax-free in the hands of the girl child. When the scheme was launched earlier this year, it was not clarified whether the withdrawal as well as interest would be exempted from tax. (Read: Now, Recurring Deposits to Attract TDS)
Opening and Operation of Account: The account may be opened by the guardian in the name of a girl child till she attains the age of ten years. Only one account is allowed per girl child. Parents can open this account for a maximum of two children. In case of twins or triplets, this facility will be extended to the third child. Account can be opened in post offices or authorized bank branches.
The account will be opened and operated by the guardian of a girl child till the girl child, in whose name the account has been opened, attains the age of 10 years. On attaining age of 10 years, the girl child may herself operate the account.
Deposits: The account may be opened with an initial deposit of Rs 1,000 and thereafter any amount in multiple of Rs 100 can be deposited. The minimum deposit for a financial year is Rs 1,000 and maximum Rs 1.5 lakh. Deposits in an account can be made till completion of fourteen years, from the date of opening of the account.
Age: The maximum age limit of the girl child for opening this account is 10 years. This year, a one-year relaxation has also been given.
Maturity: The account can be closed after the girl child in whose name the account was opened completes the age of 21. If account is not closed after maturity, the balance will continue to earn interest as specified for the scheme from time to time. (Also read: Business Extra Rs. 50,000 Tax Deduction-- 10 Facts on How to Avail It)
Withdrawal: Up to 50 per cent of the accumulated amount can be withdrawn after the account holder turns 18.
Transferability and Penalty: The account may be transferred anywhere in India if the girl child shifts to a place other than the city or locality where the account stands. An account where minimum amount has not been deposited in a particular year will attract a fine of Rs 50 per year.
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