If you have a girl child, it’s likely you have heard about the very popular sukanya samridhi account. This scheme was launched for the benefit of girl child. The account has benefits similar to a PPF account. Deposits are eligible for deduction under section 80C and interest income is completely tax free. Rate of interest is slightly better than PPF.
The income tax department has recently revised sukanya samridhi account rules, 2014. New sukanya samridhi account rules, 2016 have been announced.
What does not change –
- The sukanya samridhi account continues to enjoy tax benefits under section 80C.
- A maximum of Rs 1,50,000 can be invested in one financial year.
- Interest income is fully tax free.
- There is no tax on withdrawals.
The following changes have been introduced via Sukanya Samridhi Account Rules, 2016
Sukanya Samridhi Account (SSY account) is NOT allowed for NRI girls – A girl child would be eligible for an SSY account if she is a Resident Indian Citizen at the time of account opening and remains so until maturity or closure of account. Therefore, non-resident Indian (NRI) girl child cannot benefit from sukanya samridhi account scheme.
Girl child has to be both a citizen of India as well as resident in India, in order to be eligible. NRI girl child cannot benefit from this scheme.
Change in Residential status after opening the account – At any time after opening SSY account, if the girl child becomes non-resident or non-citizen of India, guardian shall intimate the bank within one month from such change. No interest shall be paid from the date citizenship or residential status changes and account shall be considered as closed.
Includes adopted and natural girl child – While the previous rules were silent in this aspect, the new rules have made an adopted girl child eligible for SSY account.
Maximum period of deposit – As per the new rules, deposits to sukanya account may be made till completion of 15 years from the date of opening of the account. The earlier rules gave a time limit of 14 years.
Default in deposits – Non-payment of minimum deposit of Rs 1,000 shall be considered as a default in the account. In case of default, a penalty of Rs 50 must be paid along with minimum deposit amount. If such penalty is not paid, the entire deposit, including deposits made before the date of default shall receive interest as if it were a post office savings bank account (any excess interest paid shall be reversed). The only exception made to this rule is in case of default due to death of the guardian.
Medical exigencies & premature closure – In case of life threatening disease of the account holder or guardian, it may become difficult to continue deposits to the account. In such a case the bank may allow premature closure on compassionate grounds. However, premature closure cannot be made before 5 years from the opening of such account for this particular reason. Premature closure, though, can be made in case of girl child turning non-resident or non-citizen or in case of default where interest is paid as per post office savings bank account rates.
Interest calculation – Interest on deposit to sukanya samridhi account shall be calculated for a calendar month on the lowest balance in the account on the deposits made between the close of the tenth day and the end of the month.