Sukanya Samriddhi Account- Tax & Other benefits

Sukanya Samriddhi Account- Tax & Other benefits

 

CA Sandeep Kanoi

 

Prime Minister Narendra Modi has Launched Sukanya Samridhi Yojna' (girl child prosperity scheme) with the vision to provide for Girl Child Education and Her Marriage Expense. Sukanya Samriddhi Account Scheme is asmall deposit scheme for girl child, as part of 'Beti Bachao Beti Padhao' campaign, which would fetch yearly interest rate of 9.1 per cent and provide income tax deduction Under section 80C of the Income Tax Act,1961.

In this article we have discussed Provisions of this Scheme alongwith tax and other benefits :-

Date of Commencement of Scheme- Sukanya Samriddhi Account Scheme is been notified by Ministry of Finance vide Notification No. G.S.R.863(E) Dated 02.12.2014. Shceme become operational by notification of rules namely 'Sukanya Samriddhi Account Rules, 2014'.

 

Depositor- For this scheme Depositor is an individual who on behalf of a minor girl child of whom he or she is the guardian and deposits amount in account opened under this scheme.

Who can be 'Guardian' under this Scheme – In relation to a minor girl Child Guardian means

(i) either father or mother; and

(ii) where neither parent is alive or is incapable of acting, a person entitled under the law for the time being in force to have the care of the property of the minor.

One Girl One Account- Depositor cannot open multiple or more than one account in the name of a Girl Child.

Can be opened for Maximum two girls – Natural or legal guardian of a girl child   allowed to open one account each for two girl children's.

Account opening for third Girl – Under this scheme natural or legal guardian of the girl child shall be allowed to open third account in the event of birth of twin girls as second birth or if the first birth itself results into three girl children, on production of a certificate to this effect from the competent medical authorities where the birth of such twin or triple girl children takes place.

Age Restriction for Opening of Account- The account may be opened by the natural or legal guardian in the name of a girl child from the birth of the girl child till she attains the age of ten years and any girl child, who had attained the age of ten years, one year prior to the commencement of these rules shall also be eligible for opening of account under these rules. Scheme is been commenced from 02.12.2014.

Grace Period for Opening of Account- Account can be opened up to age of 10 years only from the date of birth. For initial operations of Scheme, one year grace has been given. With the grace, Girl child who is born between 2.12.2003 & 1.12.2004 can open account up to 1.12.2015.

 

Documents to Open the Account and how to open the account- Birth certificate of a girl child in whose name the account is opened shall be submitted by the guardian at the time of opening of the account in post office or bank along with other documents relating to identity and residence proof of the depositor.  As of now, government owned banks are still in the process of completing formalities to open the Sukanya Samriddhi Yojana (SSY) Account, you may visit any of the government banks for the purpose of opening the account. (Some of these banks include – State Bank of India , Bank of Baroda, Punjab National Bank, Bank of India, Canara Bank, Andhra Bank, UCO Bank, Allahabad Bank, Corporation Bank etc.,). So Document required for opening Sukanya Samriddhi account are:-

o    Birth certificate of girl child

o    Address proof

o    Identity proof

No Fixed Interest Rate- Under this scheme Interest rate is not fixed and Government will declare on yearly basis the Interest on accounts opened under these rules. For the Financial Year 2014-15 Govt. has declared Interest Rate of 9.10% vide Notification F.NO. 2/3/2014.NS-II, DATED 20-1-2015.

Interest After Maturity of account- If account is not closed after maturity, balance will continue to earn interest as specified for the scheme from time to time.

Interest Compounding Monthly/ Yearly

Interest will be compounded yearly and will be credited to account till the account completes fourteen years from the date of opening.

In case of account holder opting for monthly interest, the same shall be calculated on the balance in the account on completed thousands, in the balance which shall be paid to the account holder and the remaining amount in fraction of thousand will continue to earn interest at the prevailing rate.

Where one can open account?-   At any post office in India doing savings bank work and Branch of a commercial bank authorised by the Central Government to open an account under 'Sukanya Samriddhi Account Rules, 2014'.

Maximum and Minimum Deposit- The account may be opened with an initial deposit of one thousand rupees and thereafter any amount in multiple of one hundred rupees may be deposited subject to the condition that a minimum of one thousand rupees shall be deposited in a financial year but the total money deposited in an account on a single occasion or on multiple occasions shall not exceed one lakh fifty thousand rupees in a financial year.

Minimum – Rs, 1000/- Per Year

Maximum- Rs. 1,50,000/- Per Year

Term Period – Deposits can be made till completion of fourteen years from the date of opening of the account. The maturity of the account is 21 years from the date of opening of account or if the girl gets married before completion of such 21 years. In other words No Deposit for the period from 15th to 21st Year of account.

Regularisation of irregular account and Penalty – Where minimum amount of Rs. 1000/- a year has not been deposited than such irregular account may be regularised on payment of a penalty offifty rupees per year along with the minimum subscription of Rs. 1000/- for the year (s) of default any time till the account completes fourteen years.

Mode of Deposit – Deposit can be made in cash; or   by cheque or demand draft. Where deposit is made by cheque or demand draft, the date of encashment of the cheque or demand draft shall be the date of credit to the account.

Who can Operation the account and can the girl child operate the account?

(1) The account shall be opened and operated by the natural or legal guardian of a girl child till the girl child in whose name the account has been opened attains the age of ten years.

(2) On attaining age of ten years, the account holder that is the girl child may herself operate the account. however, deposit in the account may be made by the guardian or any other person or authority.

Premature closure of account –

(1) In the event of death of the account holder. the account shall be closed immediately on production of death certificate issued by the competent authority and the balance at the credit of the account shall be paid along with interest till the month preceding the month of premature closure of the account , to the guardian of the account holder.

(2)   Where the Central Government is satisfied that operation or continuation of the account is causing undue hardship to the account holder, it may, by order for reasons to be recorded in writing, allow pre-mature closure of the account  only in cases of extreme compassionate grounds such as medical support in life‑ threatening diseases, death, etc.

Pass book

(1) On opening an account, the depositor shall be given a pass book bearing the date of birth of the girl child, date of opening of account, account number, name and address of the account holder and the amount deposited.

(2) The pass book shall be presented to the post office or bank. as the case may be, at the time of depositing money in the account and receiving payment of interest and also at the time of final closure of the account on maturity.

Transfer of account to other place –    The account may be transferred anywhere in India if the girl child in whose name the account stands shifts to a place other than the city or locality where the account stands.

Pre-Mature Withdrawal- To meet the financial requirements of the account holder for the purpose of higher education and marriage withdrawal up to fifty per cent of the balance at the credit, at the end of preceding financial year shall be allowed but such withdrawal shall be allowed only when the account holder girl child attains the age of eighteen years.

Closure on maturity or before maturity due to Marriage of Account Holder- The account shall mature on completion of twenty-one years from the date of opening of the account but in case marriage of the account holder takes place before completion of such period of twenty-one years the operation of the account shall not be permitted beyond the date of her marriage. In such closure of accounts accountholder have to give an affidavit to the effect that she is not less than eighteen years of age as on the date of closing of account.

Payment of Interest and Principal on Maturity- On maturity or pre maturity withdrawal due to marriage of girl child, the balance including interest outstanding in the account will be paid to the account holder on production of withdrawal slip along with the pass book.

Tax Benefit – The amount deposited towards Sukanya Samriddhi Account is deductible under section 80C of Income tax Act,1961 upto Rs.1.5 lakhs as notified by Notification No. 09/2015 dated 21.01.2015. Amount deposited in this account will be counted in overall limit of Rs. 1.50 Lakh under section 80C. Interest earned in this scheme is taxable, but maturity amount is exempt.

Comparison with PPF in respect of Tax Benefit- under PPF Scheme interest earned is tax free but interest earned on Sukanya Samriddhi Account deposit is taxable. Investment in Both PPF & Sukanya Samriddhi Account is eligible for deduction under section 80C of the Income Tax Act, 1961.

Drawback of the Sukanya Samriddhi Account Scheme-

1.     High Lock in Period

2.     Limitation on No. of Account

3.     Tax on Interest Income

4.     Scheme do not provide for online transfer of Amount in this account. It allows only payment by Cash, Cheque and Demand Draft.

5.     No Clarity on Future Interest Rate for this account.

6.     No Clarity on Taxability of Maturity Amount.

Benefits of Sukanya Samriddhi Account Scheme-

1. Higher Interest Rate

2. Tax Benefit Under Section 80C

3.  Payment on Maturity to Girl Child.

4. Interest Payment even after Maturity if account is not closed.

5. Flexibility in Deposits- Any Number of time amount can be deposits in Multiple of Rs. 100 subject to Maximum Limit of Rs. 1.50 Lakh per year.

6. Transferable Anywhere in India.

7. Even Girl Child can operate after she attains the Age of 10 Year.

Conclusion - It's a good scheme started with a good purpose by the Government but again a halfhearted effort as government should have exempt Interest earned on this scheme or should have provided separate deduction for amount deposited in this scheme instead of including it in Overall Deduction Limit of Section 80C of the Income Tax Act, 1961.