ppf and ssy interest rate, sukanya interest rate | PPF or Sukanya Samriddhi Yojana, know which is better investment scheme for daughters, PPF vs SSY: PPF or Sukanya Samriddhi Yojana, know which is better investment scheme for daughters

New Delhi: When it comes to long term savings investment options for daughters, parents often get confused between Public Provident Fund and Sukanya Samriddhi Yojana. Which to choose? Saving for the education and marriage of daughters is one of the major financial goals for parents. Therefore it is necessary to make the right choice between the two options. Parents need to choose the instrument which gives the highest return along with other benefits.

Public Provident Fund (PPF)

PPF is a popular long-term investment option that enjoys tax-exempt-exempt (EEE) status. It offers a high interest rate and is loaded with tax benefits. The interest rate offered on PPF is higher as compared to most other fixed investment products of the same tenure. Contributions, interest earned and returns are not taxable under the Income Tax Act. Investment in PPF can be done in a lump sum or in a maximum of 12 instalments. The minimum investment allowed for each financial year is Rs 500 and the maximum is Rs 1.5 lakh. The current interest rate is 7.1% per annum and the maturity period of the PPF account is 15 years.

Sukanya Samriddhi Yojana (SSY)

Sukanya Samriddhi Yojana is one of the most popular long term investment tools for daughters. The normal age limit for opening an SSY account for a girl child is 10 years from the date of birth of the child. Also, she must be a resident of India. The girl child will become the account holder when she turns 18. Minimum Rs 250 and maximum Rs 1.5 lakh can be invested in a financial year. Earlier the minimum contribution was Rs 1,000. However, the government reduced it to Rs 250 in 2018. Also, the interest earned and maturity amount is exempt from tax. Sukanya Samriddhi Yojana now offers 7.6% interest.

PPF Interest Rate Vs SSY Interest Rate

Currently, Sukanya Samriddhi Yojana is getting a higher interest rate of 7.6 per cent, while the interest on deposits in PPF is only 7.1 per cent. Hence, comparing the two schemes only in terms of interest rates or returns, Sukanya Samriddhi Yojana seems like a better option for parents. Remember that the government revises the interest rates of all small savings schemes, including PPF and SSY, on a quarterly basis. While there is a guarantee that the interest rate being offered today will remain the same in future as well, it cannot be said that SSY has historically been offering a higher rate of interest than PPF. Ever since the introduction of SSY, it is offering higher rate of interest as compared to PPF. Even when the interest rates on all savings schemes have come down, SSY is still offering better interest rates.

who better? PPF or Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana is better in terms of interest rate. But this account has to be compulsorily closed after completion of 21 years of opening which is not the case for PPF account as it can be extended for any number of blocks every 5 years. As many times as you want. This means that while one can avail the SSY scheme for a limited period of time, the same is not the case with PPF and one can hold a PPF account for the entire lifetime.

If it comes to choosing between the two schemes, PPF would be a better option for those who want to deposit money for their daughter beyond 21 years, while SSY may be a better option , who want to get high returns till their daughter turns 21.

According to experts, keeping both PPF and SSY accounts in the name of the daughter is the best option. One can choose to deposit a larger amount in the SSY account as long as it fetches a higher rate of interest and keep some amount in the PPF account so that after the closure of the SSY account after 21 years, they can continue to deposit in the PPF account. Can you

Actually, when the daughter starts earning money, she can also deposit it in the PPF account and deposit it for her future. It is also worth remembering that, on maturity of SSY account, one will face difficulty in re-investing the accumulated amount in any other tax-free investment scheme as the maximum amount which can be availed in any scheme (like PPF) can invest in. The tax saving under section 80C is Rs 1.5 lakh per annum. However, if you need the accumulated amount for purposes like your daughter’s marriage or higher education, then SSY savings will prove useful.

Views of experts regarding PPF or SSY

Experts believe that one should not spend all their money for girls only in SSY. Instead, they should also keep a small portion for savings schemes like PPF. PPF also provides enormous flexibility and liquidity throughout the life of the child. This is the reason why experts advise people to invest a major portion in Sukanya Samriddhi Yojana and also to keep a small portion in PPF to take advantage of the introduction of PPF.

Under SSY, a parent or guardian of a daughter between the age of zero to 10 years can open an account in the name of the child. Deposits can be made on monthly or yearly basis for 15 years from the date of account opening. Investments cannot be made after a period of 15 years, but the account continues to earn interest for the next seven years and matures after 21 years. One can make withdrawals only after the child turns 18, subject to certain conditions.

Both PPF and Sukanya schemes are eligible for deduction under Section 80C of the Income Tax Act and fall under the exempt-exempt and exempted brackets. While both are great long-term investment options, experts also believe that apart from debt instruments that offer guaranteed returns at moderate rates, parents should also invest in instruments like mutual funds. It is always a good idea to diversify your investments.