Know the key differences between PPF and Sukanya Samriddhi

Here is all you need to know about the differences between Public Provident Fund and Sukanya Samriddhi Yojana.

Nov 08, 2019 01:11 IST India Infoline News Service

When it comes to choosing investment options to save taxes, two Government backed schemes that run high in popularity are the Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY). Under both these schemes you are eligible for tax exemption under Section 80C of the Income Tax Act. Both enjoy the EEE or exemption, exemption, exemption status. This means investment in both schemes is tax free at the investment, accrual and withdrawal stage.
 
But when you compare PPF vs. Sukanya, you will find that these are essentially two very different schemes that may cater to different investment goals. Here is all you need to know about the differences between the two. But before we get into the differences, let us define both of these schemes in some detail. 

What is PPF? 

The PPF is a Government backed small savings scheme that was launched in 1968. The primary objective of this scheme is to help retail investors put away money in small amounts over a period of time to augment retirement savings. 

Key Features of PPF: 

  1. To make it accessible to all, a PPF account can be opened with a minimum amount of only Rs100. The scheme has a 15-year lock-in period at a rate of interest that is reset on a quarterly basis by the Government of India. Presently, the rate of interest on PPF is 7.9%.
  2. You can also choose to extend the duration of your PPF account by blocks of 5 years beyond 15 years. Payments towards the account can be made through multiple modes such as cash, cheque, demand draft and through online banking facility.
  3. You can also avail of a loan facility against your PPF account between the third and fifth year of its opening. However, the amount is restricted to 25% of investments made by the end of the second financial year. 

What is Sukanya Samriddhi Yojana?

The Sukanya Samriddhi Yojana was launched the Government under its ‘Beti Bachao Beti Padhao’ campaign. The primary objective of this small savings scheme is to secure the financial future of the girl child. 

Key features of Sukanya Samriddhi Yojana:

  1. The parents or the legal guardians of a girl child can open a SSY account of a girl child who is an Indian resident below the age of 10. In a family, SSY accounts can be opened for up to two female children. A third SSY account is also allowed in case two of three are twins.
  2. In a SSY, deposits must be made for a minimum of 15 years. However, the scheme attains maturity after 21 years. The minimum deposit towards this scheme in a financial year is Rs500 and the maximum limit is Rs1.5 lakhs.
  3. The most attractive feature of the SSY is that it yields higher rate of interest as compared to other savings schemes, thus generating the potential of safe and modest returns till the girl child is an adult and chooses to pursue higher studies or get married.
  4. Currently, the rate of interest on SSY is 8.4% p.a. The rate of interest is determined on a quarterly basis by the Government of India.
  5. Now let’s delve into some differences between these two accounts 

Sukanya Samriddhi Yojana vs. PPF Key Differences

Features Sukanya Samriddhi Yojana PPF
Objective To secure the future of the girl child in an Indian family. To build long term savings and get good returns for future use, like in retirement.
Eligibility Parents or legal guardian of a girl child up to the age of 10. The girl child must be an Indian citizen. Any Indian citizen is eligible to open a PPF account. You can open a PPF account on behalf of a minor below the age of 18.
Number of accounts allowed Maximum of two, for two female children in a family. In case of twin girls, a third account is also allowed for a separate girl child. Only one account for an individual who is an Indian resident. However, an adult can open and maintain a PPF account on behalf of his or her child.
Maturity period 21 years or until  she gets married after attaining adulthood at the age of 18. 15 years
Rate of interest 7.9 % currently 8.4% currently
Account opening At post offices and banks offering the facility to open Sukanya Samriddhi account or SSY. At post offices and banks offering PPF.
Complete withdrawal After a girl attains the age of 21, or 18 if she wishes to get married. Only after maturity after 15 years.
Partial withdrawal Up to 50 % of the amount invested in the previous year can be withdrawn for education or marriage. 50% of amount invested after 6 years from the date of  account opening.
 
Thus, while there are some similarities between these two small savings account schemes, they are also vastly different and meant to serve different investment goals. However, investing in either of these is beneficial from a tax planning perspective.

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