Simplified Laws Guide to Taxation and Legal Concern
Pursuant to the Budget announcement in July 2014, a special small savings instrument for the welfare of the girl child has been introduced under the Sukanya Samriddhi Account Rules, 2014.
The following tax benefits have been envisaged in the Sukanya Samriddhi Account scheme:-
(i) The investments made in the Scheme will be eligible for deduction under section 80C of the Act. (Note: the maximum deduction u/s 80C is Rs.150000 per year)
(ii) The interest accruing on deposits in such account will be exempt from income tax. (Note: This is similar to interest on PPF investment which is exempt from tax. Remember that the interest earned on other investment avenue such as Fixed Deposit, National Savings Certificate (NSC) are subject to tax)
(iii) The withdrawal from the said scheme in accordance with the rules of the said scheme will be exempt from tax.
As a result, the interest accruing on deposits in, and withdrawals from any account under the scheme would be exempt. (Note: So, this is one of the good investment options, one can look for)
These amendments will take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years
About Sukanya Samriddhi Account scheme:
The Union Government has launched a small deposit scheme for the girl child, as part of the ‘Beti Bachao Beti Padhao’ campaign. This scheme is specially designed for girls’ higher education or marriage needs
- Rate of interest 9.1% Per Annum(2014-15),calculated on yearly basis ,Yearly compounded
- Minimum INR. 1000/- and Maximum INR. 1,50,000/- in a financial year.
- A legal Guardian/Natural Guardian can open account in the name of Girl Child
- A guardian can open only one account in the name of one girl child and maximum two accounts in the name of two different Girl children. (Means the account can be opened in the name of the child limited one account per child, maximum of two children by a family)
- 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 to1.12.2015
- If minimum Rs 1000/- is not deposited in a financial year, account will become discontinued and can be revived with a penalty of Rs 50/- per year with minimum amount required for deposit for that year
- Partial withdrawal, maximum up to 50% of balance standing at the end of the preceding financial year can be taken after Account holder’s attaining age of 18 years. Account can be closed after completion of 21 years or the date of marriage of the girl child, whichever is earlier.
- Account can be opened in post offices or authorized bank branches
Is it a good investment option?
- From the tax perspective, no great deal. You can invest in PPF account.
- From the safety of funds with tax free return, one can still invest in this scheme
- However, from the point of return on investment, one can look at Mutual Fund (ELSS) scheme or debt/equity funds.
Thought for the day
An investment in knowledge pays the best interest.
