Maturity Value Comparison: Sukanya Samridhi 8.6% Vs. 9.2% Interest

The interest rate on Sukanya Samriddhi Scheme was lowered to 8.6% from the previous year’s 9.2% by the government of India. One more significant announcement was made i.e. the interest rate for the small savings schemes which also includes PPF. So in case of SSA, 8.6% would be the interest rate for Q1: Apr’16-Jun’16. For the next quarter the interest rate would be again revised by the government.

Now the question arises, will the Sukanya Samriddhi Account continue to remain the best choice by the investors even though the interest would be revised on quarterly basis but compounded annually? This is because the main objective of SSA was to secure the financial future of the girl child by offering higher returns. The amount after the scheme matures can be used for education and marriage of the girl child. Read in detail about the features of SSY.

We’ll check how the maturity amount will reduce by comparing the returns offered for the interest rate of 9.2% in the previous year with the revised rate of 8.6%. The below table shows returns generated when the girl reaches the age of 21 years, for yearly investment starting from 1000 to 10000 per year.

Yearly InvestmentReturns @ 9.2% in INRReturns @ 8.6% in INRDifference
1,000 53,37648,9124,464
2,0001,06,75397,8248,929
3,0001,60,1291,46,73613,393
4,0002,13,5061,95,64817,858
5,0002,66,882 2,44,560 22,322
6,0003,20,2592,93,47226,787
7,0003,73,6353,42,38431,251
8,0004,27,0113,91,29635,715
9,0004,80,3884,40,20840,180
10,0005,33,7644,89,12044,644

So as you can see in the above table, the difference is quite significant and investors especially the low/middle income individual’s will certainly give a second thought before putting their hard earned money in SSA. Other options for them are PPF; which compared to SSA will further give lower return. However the biggest benefits offered by these two schemes are:

  • Interest and invested income are fully tax exempt which is not the case with high risk products
  • Returns are guaranteed/fixed and there is zero risk involved compared to equities/mutual fund which are volatile in nature and are very risky in nature. Although returns are on the lower side.
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