Sukanya Samriddhi Yojana vs Public Provident Fund

Saving for the future is crucial, whether it's for your child's education, your retirement, or other long-term goals. The Indian government offers several safe investment options to help you grow your wealth. Two popular choices are the Sukanya Samriddhi Yojana (SSY) and the Public Provident Fund (PPF). While both offer attractive returns and tax benefits, they have distinct features that cater to different needs.

While both these safe investment avenues share similarities with fixed deposits like guaranteed returns and tax benefits, they also have unique features.

Also read: PPF calculator

Sukanya Samriddhi Yojana vs PPF: Features

In-depth analysis of SSY vs PPF

• Interest rate: Both SSY and PPF interest rates are subject to quarterly revisions by the central government. An SSY account currently offers an interest rate of 8.2% (April-June quarter 2024). The current PPF interest rate is 7.1% (April-June quarter of 2024). For both schemes, interest is compounded annually and credited at the end of the financial year.
• Deposit limit: Since the SSY scheme is designed to help parents save for their daughters, the minimum deposit limit is set at just Rs. 250. For PPF, you need to deposit a minimum amount of Rs. 500. Both these small savings schemes have a maximum annual deposit ceiling of Rs. 1.5 lakh.
• Maturity period: The maturity period of a PPF account is 15 years from the end of the financial year when the account was opened. Once matured, you can choose to extend the PPF account in 5-year intervals with or without fresh contributions. SSY accounts, on the other hand, mature after 21 years of the account opening date or when the girl child marries after attaining the legal age of marriage. SSY accounts cannot be extended.
• Tax benefits: Contributions to both SSY and PPF qualify for tax deductions of up to Rs. 1.5 lakh u/s 80(C). Additionally, these tax-saving investments fall under the EEE (Exempt, Exempt, Exempt) category. In other words, the interest accrued, as well as the maturity proceeds from these accounts, are tax-free.
• Withdrawals: Partial withdrawals can be made from a PPF account after the completion of 5 years from the end of the year the account was opened. SSY accounts allow for partial withdrawals only after the girl child reaches the age of 18 years.

SSY vs PPF: Which is better?

The answer depends entirely on your individual needs and financial goals:

• Focus on a girl child's future: If your primary objective is saving for your daughter's higher education or marriage, SSY is the clear choice. Its specific focus on this purpose often translates to higher interest rates than PPF.
• General long-term savings: If you are looking for a flexible, tax-efficient long-term savings option, PPF is a versatile choice that anyone can benefit from.
• Risk tolerance and flexibility: Both SSY and PPF are considered very safe investments. However, PPF offers greater flexibility in terms of tenure extensions and loans against the balance.

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Conclusion

SSY and PPF are excellent government-backed savings schemes. The best choice for you hinges on your saving purpose and individual circumstances. If you are focusing on your daughter's future, SSY's benefits are hard to beat. For general long-term goals with flexibility as a priority, PPF is a strong contender. Thoroughly research both options and consider your financial plan before making the right decision for you.

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