SIP vs Sukanya Samriddhi: Rs 1.2 lakh per year investment for 15 years; which can creates larger corpus?
Compare SIP and Sukanya Samriddhi Account for a 15-year investment of Rs 1.2 lakh annually. Understand their returns, benefits and features..
SIP (Systematic Investment Plan) and Sukanya Samriddhi Yojana (SSY) are popular long-term investment options. SIP offers market-linked returns through mutual funds, while SSA provides guaranteed, tax-free returns for girl children. This article evaluates a 15-year investment of Rs 1.2 lakh annually, analysing maturity value, interest earned and key features.
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning)
Understanding SIP (Systematic Investment Plan)
SIP is a disciplined approach to investing in mutual funds by contributing a fixed amount at regular intervals. It is designed for steady wealth creation over time.
How Does SIP Work?
- A fixed amount is automatically debited from your bank account at a chosen interval and invested in mutual funds.
- Units are allocated based on the mutual fund's Net Asset Value (NAV) at the time of investment.
- Over time, additional units are purchased, compounding the returns on reinvestments.
SIP Returns
- Monthly Investment: Rs 10,000
- Total Investment (15 Years): Rs 18,00,000
- Interest Earned: Rs 32,45,760
- Maturity Value: Rs 50,45,760
Advantages of SIP
- Regular investments reduce market volatility risks.
- Investors can stop, pause, or modify contributions.
- Potential for higher returns over the long term.
What is Sukanya Samriddhi Yojana (SSY)?
Sukanya Samriddhi Account is a government-backed savings scheme aimed at securing the financial future of a girl child. It offers guaranteed returns along with tax benefits.
Key Features of SSY
- Minimum deposit is Rs 250 annually, and the maximum is Rs 1.5 lakh.
- Can be opened for a girl child under 10 years of age.
- Maturity occurs after 21 years or upon the girl’s marriage after 18 years.
- Interest and maturity amounts are tax-free under Section 10 of the Income Tax Act.
SSA Returns
- Total Investment (15 Years): Rs 18,00,000
- Interest Earned: Rs 37,42,062
- Maturity Value: Rs 55,42,062
Advantages of SSY
- Guaranteed, risk-free returns.
- Dedicated savings for a girl child’s education or marriage.
- Full tax benefits on deposits and maturity value under Section 80C.
SIP vs Sukanya Samriddhi: Key Comparisons
- SIP offers flexibility and potentially higher returns, but it is subject to market risks.
- SSA provides guaranteed, tax-free returns, making it a safer option for long-term goals.
- SIP allows investment for anyone, while SSA is exclusive to girl children.
Choosing the Right Option
- Choose SIP if you are comfortable with market risks and want flexibility.
- Opt for SSA if you prioritize guaranteed returns and tax benefits for your daughter’s future.
- The decision should align with your financial goals and risk appetite.