Where to invest for girl child – Sukanya Samriddhi Account or PPF

Prime minister of India, Narendra Modi, has recently launched Sukanya Samriddhi account scheme for a girl child. If you read our article on various provisions of public provident fund or PPF scheme then you will find lots of similar features are also available in Sukanya Samriddhi Account scheme introduced specifically for a girl child.

In this article we will be discussing difference between Sukanya Samriddhi Account and PPF to know which one is a better investment option for a girl child. We will also be looking into tax benefits and other features at the end of the post.

Where to invest for a girl child–Sukanya Samriddhi Account or PPF

Comparison of Sukanya Samriddhi Account with PPF

Particulars Sukanya Samriddhi Account Public Provident Fund (PPF)
Who can open these accounts Parents or natural or legal guardians in the name of girl child Anyone including girl child
Age limits 10 years or less than 10 years of age i.e. from the birth till she attains the age of 10 years No age limit
Where to open Post office or authorised private and PSU banks Post office or authorised private and PSU banks
Maximum number of deposits in a year No Limits Specified 12 in a year
Limits in number of accounts per person One One
Interest rate per annum 9.1% (for fiscal year 2014-2015) 8.7% (for fiscal year 2014-2015)
Minimum contribution limit per year (in rupees) 1000 500
Maximum Contribution limit per year (in Rupees) 150000 150000
Tax deduction under section 80C Yes, Available up to Rs 150000 per year Yes, Available up to Rs 150000 per year
Is interest earned from these investments taxable No, not taxable (New provision in budget 2015-2016) No, not taxable
Is maturity amount taxable No, not liable to tax, total amount received at the time of maturity is exempted No, not liable to tax, total amount received at the time of maturity is exempted
Partial withdrawal 50% allowed when girl reaches the age of 18 years Allowed after 7 years of opening PPF account
Maturity time limit On marriage of the girl child or 21 years from the date of opening Sukanya Samriddhi Account, whichever is earlier 15 years
Can maturity period be extended No such provision Yes, can be extended for another 5 years. There is no restriction on number of such extension in PPF scheme but such extension should be for a 5 years tenure
Penalty for not contributing(in Rupees) 50 per non contributing year 50 per non contributing year
What is the allowed mode of deposit to these schemes Cash or Demand Draft or Cheque Cash or Demand Draft or Cheque
Loan No, loan cannot be taken Loan can be taken from the third year of opening of PPF account to the sixth year
Transferability Yes, available Yes, available

If you look at the flexibility of extending the maturity period of such scheme then you will find that Sukanya Samriddhi Account scheme has tenure of 21 years with contributing term of 14 years. This means after completion of 21 years it cannot be extended further. Whereas, in PPF, after completion of 15 years tenure it can be extended in multiplication of 5 years for unlimited number of times.

Interest Rate for Sukanya Samriddhi Account is higher compare to returns on PPF. We hope this will continue in future.

All other features in PPF compare to Sukanya Samriddhi Account are almost similar.

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If you are not a risk taker and wants to save your money for the future of your girl child’s education or marriage then we suggest you to go for Sukanya Samriddhi Account scheme. We also recommend opening a PPF account if you are looking for an investment of more than Rs 150000 per year for a girl child.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.