A Must Read for Those Planing to Invest in Sukanya Samriddhi Yojna

According to Section 80C, Sukanya Samriddhi Yojna is fully exempted from income tax return liability and such was declared on 2015-16 budget. Other than Provident Public Fund (PPF), this is the only scheme under Section 80C, which is fully exempted from income tax. Even it’s accrual interest and return payout is also exempted from tax liability. During income tax filing, you must mention this under your investments claims. The interest offered in this scheme is 9.1 percent, which is higher than the PPF interest rate of 8.7 percent. Even all the banks offer interest rate between 8-9% for any savings scheme.

However, this scheme is only useful for those who wants an extremely safe savings option for their daughters. However, taxpayers come under the 30% income tax return bracket will get sufficient benefit from PPF and other regular investments to meet the Rs 1.5 lakhs limit. Even five years FDs or other savings such as NSC or tuition fees also offer approximate same benefits under section 80C. For income tax filing, though Sukanya Samriddhi Yojna is superior from PPF in terms of deduction and tax free returns, but is less flexible than PPFs. It is a good option for stable returns, but if you are looking for a long-term equity product for your children’s education than PPF is the better option.

However, if interest rates go down, then return from Sukanya Samriddhi Yojna will also go down. So, on that term, income funds will turn to be a better option for children investments and income tax return saving instrument. There are many instances when investors invest too much in such schemes and forget to keep a balance between other trading instruments. Such doing will get you a good saving in current income tax filing, but will get you much lower return in the long run.

Also Read : Expenses That Saves Your Tax Payments