Sukanya Samriddhi Yojana (SSY): At a time when market-linked investment options are giving annualised returns of as high as over 20 per cent, investing in a long-term, guaranteed fixed income investment scheme such as Sukanya Samriddhi Yojana doesn't sound lucrative.

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But for conservative investors who want their money to be parked safely or who don't want to lose their patience during the ups and downs of the market, fixed income return plans come handy.

It saves them from tracking their returns every now and then or adjusting their options if their investment options fare poorly.

Since the Post Office-run Sukanya Samriddhi Yojana is aimed at creating a fund for a girl child's education and her marriage, many people opt for it as an assured return option.

"Sukanya Samriddhi is a government scheme, hence you get assured returns and capital safety to the highest degree. The scheme has an exempt-exempt-exempt (EEE) status, so your returns are 100% tax-free. It pays better than PPF, which is also EEE. It’s an investment tool aimed at long-term needs like education and marriage; hence, it’s a good option for conservative investors," says AR Hemant, AVP, BankBazaar.com.

What is Sukanya Samriddhi Yojana?

Started in January 2015, the purpose of Sukanya Samriddhi Yojana is to benefit a girl child through an investment made by her parents or guardians.

The investment can be made for a maximum of 15 years for a girl child below 10 years up to the maximum age of 21 years.

The maturity amount the investor gets after 15 years can be used for education or the marriage of the girl child.

Sukanya Samriddhi Yojana: Minimum and maximum investments

The investment can be as low as Rs 250 in a financial year to a maximum of Rs 1.50 lakh.

The investment can be made in one go or through multiple instalments in a month or year.

Sukanya Samriddhi Yojana: Interest Rate

Since it's a fixed rate government-run scheme, the current fixed rate of interest is 8.0 per cent.

However, the rate is subject to increase or decrease as per government policies. However, one gets yearly compound interest on their investment under the scheme. 

Sukanya Samriddhi Yojana: Tax rebate

The deposits made in the scheme are qualified for deduction under 80C section of the Income Tax Act.

Likewise, the interest earned on the investment is also tax free under the Income Tax Act.

Sukanya Samriddhi Yojana: Withdrawal

One can withdraw money from the scheme only after the girl child either attains the age of 18 or passes Standard 10.

Withdrawals can be up to 50 per cent of the balance available at the end of the preceding financial year.

It can be made in one lump sum or in installments, not exceeding one per year for a maximum of five years.

Sukanya Samriddhi Yojana: How to build a fund of nearly Rs 70 lakh?

Since one can make a maximum of Rs 1.50 lakh yearly investment in Sukanya Samriddhi Yojana, one can make a maximum investment of Rs 22.50 lakh in those years.

A Rs 1.50 lakh yearly investment means your monthly contribution would be approximately Rs 12,500, or equivalent to Rs 410.95 a day.

That investment for 15 years will give you an interest income of Rs 47.3 lakh and a maturity amount of Rs 69.80 lakh.

So, the total investment of Rs 22.50 lakh in Sukanya Samriddhi Yojana will give you a return of nearly Rs 70 lakh in 15 years.

But here we are not taking inflation of the next 15 years into account.

With that in mind, the maturity amount may not look that lucrative.

Since education inflation is rising faster than retail inflation in India, one needs good amount of money to cover up the inflation gap.

In such a scenario, one may need high-return investment options other than while fixed rate investment schemes can give peace of mind, one can mix in their portfolio investment options providing higher returns.

"Education inflation is a problem. It’s seen to be happening at twice the rate of cost inflation. So with 6% cost inflation, education inflation may be 12%. It implies that an education that costs lakhs today may cost crores in 15-20 years. Therefore, you need to invest in a manner that helps you tackle education inflation. A debt investment plan may prove inadequate even if you invest to the full limit of Rs 1.5 lakh per annum. But an equity mutual fund SIP for Rs 12,500 a month will give you Rs 1.4 crore in 21 years assuming a moderate return of 12% per annum. Therefore, every investor should find an appropriate mix of small savings and mutual fund SIPs to get to their financial targets at the lowest possible costs," said Hemant.