SSY is the best tax saving small saving scheme

how the plan works

The parent or legal guardian of the girl child can open the account in the name of the child before the age of 10 years. Maximum two accounts are allowed for two girl children in a family.

Total investment allowed in a financial year 1.5 lakh, which is the combined limit even in case of two accounts in the same family.

The minimum annual investment required to keep the account active is 250, which failed 50 penalty should be paid per default year to regularize the account. If not regularised, the balance available in the account will continue to earn interest till maturity. An SSY account comes with a tenure of 21 years, out of which deposits are allowed for the first 15 years. For example, if the account is opened for a 5 year old girl child, deposits can be made till the age of 20 years and the account will mature till the age of 26 years. Premature withdrawal of up to 50% of the total balance is allowed if the account holder enters after 18 years of age, or on production of proof of marriage, under specific conditions of higher education. A parent/guardian can apply for premature closure under three conditions – death of the girl child, her marriage after the age of 18, and financial inability of the depositor to continue contributing.

The interest rate on SSY is reviewed by the government every quarter. The current rate of 7.6% was last revised for the April-June 2020 quarter and has remained unchanged since then. Interest is calculated on the minimum balance in the account between the 5th and the last date of the month. For this reason, it is advised that deposits are made by the 4th of each month, and those who make a lump sum annual contribution should do so by 4th April for maximum return on their contribution.

tax rules

Deposits made in SSY can be claimed as deduction under the limits of section 80C 1.5 lakh. The annual interest earned and the amount withdrawn on maturity are also exempt from tax.