Investing in Sukanya Samriddhi Yojana? To make money, here is what you should keep in mind while investing in this scheme

Sukanya Samriddhi Yojana is a 100% debt-based instrument which is offering 8.4% annual interest for Jan-Mar quarter - more than PPF; Though the scheme offers tax exemption, but it is not without limitations

Sukanya Samriddhi Yojana is applicable on girls of up to 10 years of age Source: Reuters

If you are planning to invest in the future of your girl child and give, 'Sukanya Samriddhi Yojana' can be a good investment option for you. The Government of India (GoI) backed scheme is offering 8.4% interest till 31 March. The current interest rates are likely to continue in the next financial year as well. Like other small saving schemes, the interest rate is linked to the government bond yield and is subject to change every quarter. It is better than opening a PPF account for your girl child as the latter will give you interest at the rate of 7.9% annually for the Jan-Mar quarter, which means you get less money from this than you would from Sukanya Samriddhi Yojana.

Another most important advantage of this scheme is that it does not allow the proceeds of the scheme to be used for any purpose other than education and marriage.

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But, there is a small caveat - only girls of up to the age of 10 years of age can apply for it.

The Sukanya Samriddhi Yojana allows investment up to Rs 1.5 lakh and is exempted from tax just like the PPF. Accounts can be opened in any post office or designated banks with a minimum investment of Rs 1000.

Limitations

One of the limitations of the scheme is that a parent can open an account for a maximum of two daughters and the combined investment in the two accounts cannot exceed Rs 1.5 lakh in a year. This restriction has restricted the benefits it provides.

Many sector experts also feel that 'Sukanya Samriddhi Yojana' is not a viable option for a long-term goal. The reason that the investors would be better off investing in systematic investment plans (SIP) in pure equity or hybrid mutual funds as the equity investments, in the long run, is likely to give higher returns of investment.

It is advised that a more balanced allocation could be achieved through a mix of government-backed schemes and SIPs in equity and hybrid funds. Or use it in conjunction with SIPs in equity or hybrid funds. That way, you can have a balanced allocation for the education and marriage goals for your child.

Currently, the government offers nine types of small saving schemes, including Recurring Deposit (RD), Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY) and Senior Citizen Savings Scheme (SCSS).

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