Investing in Sukanya Samriddhi Yojana for your daughter’s future is a smart move, but timing is key.If you’re planning to invest, make sure you do it before April 5 to optimize your returns for the current financial year, 2024-25. Here’s why.
According to ET, the interest is calculated based on the lowest balance in the account between the 5th and the end of each month in the Sukanya Samriddhi Scheme. This means investors who wish to make lump sum investment in their SSY account should do so before April 5 to maximize interest earnings. Missing this deadline results in losing additional monthly interest on the yearly deposit.
Deposits made in the SSY account after April 5 or after the 5th of any month are not considered for interest calculation in that particular month.
If you miss the April 5 deadline, you’ll lose out on monthly interest for that year’s deposit. Similarly, monthly payments should be made on or before the 5th of each month to avoid loss of interest.
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Impact of missing the Sukanya Samriddhi Yojana deposit date
For example, suppose an SSY account holder deposits Rs 1.5 lakh on April 20. For interest calculation in April, the lowest balance between April 5 and April 30 is considered. Since the deposit on April 20 comes after this period, it won’t earn any interest for April.
In contrast, if the deposit is made on or before April 5, the lowest balance after April 5 is considered. This means the contribution made on April 5 will earn interest for the month of April.
What’s the cost of missing the April 5 SSY deposit deadline?
Now that we understand that deposits made before April 5 or the 5th of every month in SSY earn more interest compared to those made after that date, let’s know how much more interest an SSY account can earn with early deposits.
It’s important to note that interest in an SSY account is calculated monthly but credited at the end of the financial year, similar to a PPF account. The government reviews SSY interest rates every three months.
Sukanya Samriddhi Yojana typically offers a higher interest rate than Public Provident Fund (PPF). Currently, SSY offers 8.2% per annum, while PPF offers 7.1%. Missing the April 5 deadline or the 5th of every month can lead to higher losses, similar to missing the PPF investment deadline.
Consider this: For instance, the SSY’s current interest rate of 8.2% per annum for the April-June 2024 quarter. Assuming this rate remains constant throughout the 21-year SSY account duration, if an account holder deposits Rs 1.5 lakh annually before April 5 for 15 years, they would earn Rs 49.32 lakh in interest. However, if the deposit is made after April 5, the interest earned would be Rs 48.85 lakh. Thus, by investing a lump sum after April 5, the account holder would lose Rs 47,014 over the 21-year period.
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SSY account matures either after 21 years from the date of opening or when the account holder gets married after turning 18.
An SSY account holder who makes monthly payments of Rs 12,500 before the 5th of every month will earn a total interest of Rs 46.79 lakh over 21 years. However, if deposits are made after the 5th of every month, the interest earned will be Rs 46.75 lakh. In this scenario, the interest loss is Rs 3,791, which is lower than the loss incurred with a lump sum payment. Individuals making monthly contributions to SSY accounts may not lose as much interest compared to those making lump sum contributions.
Remember, the interest earned from a Sukanya Samriddhi account is tax-free. So, if you miss depositing before April 5 or the 5th of every month, you’ll miss out on earning more tax-free interest for your daughter. Parents can invest between Rs 250 and Rs 1.5 lakh per year in an SSY account for each daughter, with a maximum of two accounts per parent or legal guardian. Withdrawals can be made once the daughter turns 18 or passes the 10th standard, subject to specific conditions.
