SSY vs PPF: What is the Difference?
Investing your hard-earned money is a crucial decision and needs thorough research and analysis of the available options. Some of the factors that should be considered are financial objective, risk appetite, interest rates, flexibility and so on. Indian residents have multiple options to choose from especially with the launch of multiple savings schemes by the government of India.
Sukanya Samriddhi Yojana Account (SSY) and Public Provident Fund (PPF) are amongst the most considered safest investment options as they are backed by the Indian Government. These investment options are easily available for investors seeking substantial financial growth with a minimal risk factor.
Public Provident Fund vs Sukanya Samriddhi Account
Both PPF and SSY are good investment schemes but differ on some parameters. While the Sukanya Samriddhi Yojana is a girl child welfare scheme which helps to secure the future of a girl child, the PPF is a scheme that allows the depositors to earn tax-free interest.
Public Provident Fund (PPF) scheme is a long-term investment option in India. This scheme is aimed at providing substantial returns along with tax benefits to the investor. A PPF account can be opened in almost all the public and private sector banks across India. Apart from Banks, it can also be opened in post offices. PPF returns are fully exempt from tax under Section 80C of the Income Tax Act. Furthermore, depositors can also save tax by depositing a minimum of Rs.500 to a maximum Rs.1,50,000 in one financial year, along with facilities such as loan, withdrawal, and extension of account.
Initiated as a part of the government’s ‘Beti Bachao, Beti Padhao’ campaign, Sukanya Samriddhi Yojana or SSY is a welfare scheme designed for the girl child. An SSY account can be opened in any bank or post office across India. Investing in Sukanya Samriddhi Yojana allows parents or legal guardians to ensure financial security for a girl child aged ten years or below. Under the Sukanya Samriddhi Yojana, an account in the name of the girl can be opened across any of the private and public sector banks for a tenure of 21 years.
One thing to note here is an SSY account can only be opened in the name of a girl child while a PPF account can be opened by anyone. However, both the savings scheme have their pros and cons. The below-given table will compare PPF and Sukanya Samriddhi Account based on different parameters:
Latest Interest Rates for Small Savings Schemes (Applicable during Q4 of 2022-23):
Latest interest rates of Small Savings Schemes (NSC, PPF, KVP, SSAS, SCSS, etc.) applicable during Q4 of FY 2022-23 (01/01/2023 to 31/03/2023), are as under:
i) Sukanya Samriddhi Account Scheme (SSAS) – 7.6%
ii) Public Provident Fund (PPF) – 7.1% No change),
iii) Senior Citizen Savings Scheme (SCSS) – 8.0%,
iv) Kisan Vikas Patra (KVP) – 7.2%
v) National Savings Certificate (NSC) – 7.0%
vi) Post office MIS (Monthly Income Scheme) is 7.1%,
vii) Post Office Recurring Deposit (RD) – 5.8% (No change),
viii) Savings Deposit – 4% (No Change), and
ix) Post Office Time Deposit – 6.6% to 7.0% based on tenure of 1 to 5 years.
| Parameters | Public Provident Fund | Sukanya Samriddhi Account |
| Interest rate | 7.10% | 7.60% |
| Eligible age to enter | 15 Years | Birth |
| Minimum Deposit | Rs.500 | Rs.250 |
| Maximum Deposit | Rs.1,50,000 | Rs.1,50,000 |
| Tax Benefit | Rs.1,50,000 | Rs.1,50,000 |
| Tenure | 15 years | 21 years |
| Premature Withdrawal | After 5 financial years | After the age of 18 |
| Nomination Facility | Available | Not Available |
| Loan Facility | Available | Not Available |
In-Depth Analysis of SSY vs PPF
The above table chalks out the difference based on different parameters. This section explains the two Government-backed savings scheme in-depth comparing the tenure, how it works, eligibility, documents, interest rate, tax benefits, objectives of the schemes and interest rates offered.
Who can open the account?
A Sukanya Samriddhi Account can be opened by the biological parents or the legal guardian of a girl child. The criteria to open the account is the girl child should be a resident Indian and at most 10 years old. On the other hand, the PPF account can be opened by anyone (even minor PPF account can be opened). An individual who is a resident of India, not an NRI, can open a PPF account. The age of entry in PPF is generally 18 years.
Deposit Limit
Both the schemes can be opened with a very minimal amount; for PPF, the minimum deposit amount needed is Rs.500 and the maximum is Rs.1,50,000. On the other hand, for Sukanya Samriddhi Account, the minimum deposit should be Rs.250 whereas the maximum limit is again Rs.1,50,000.
Interest Rate Provided
The interest rates are not always the same for both the saving schemes and keep changing in the financial year as decided by the Government. The return is fixed and reviewed by the Government in quarterly. An SSY Account currently provides a rate of interest of 7.6% for 2022. The interest for this is compounded annually. While if one calculates the interest on a monthly basis, the minimum balance in SSY account between the 10th and the end of the month is taken into consideration. This means that the investments must be made before the 10th of every month.
Coming to the PPF interest rate for Q3 2021 (October-December), it is provided at 7.1%. To calculate the interest, the lowest balance between the 5th to the last day of each month is taken into consideration. Hence, the investments must be made before the 5th of every month.
Tax Benefits
Investments in PPF are eligible for exemption under Section 80(C) of the Income Tax Act,1961. Thus, the interest accrued at the time of maturity is exempt from any taxes. If the contribution towards PPF is of Rs.1.5 lakh per year (which is also the maximum deposit amount) and you are in the 30% tax category, you will be able to save taxes amounting to Rs.45,000.
Similarly, Sukanya Samriddhi Account also falls under the same category and they are eligible for exemptions under Section 80C of the Act. The interest accrued and final amount on maturity are also exempt from taxes. As mentioned earlier, SSY also has a cap of Rs.1.5 lakh investment per financial year.
Withdrawal
Under PPF, partial or complete withdrawal can be made after the end of 6 financial years from the account opening date. However, it is advisable that one should check with the respective bank to understand partial withdrawal process in a lucid way. Some major private sector banks such as ICICI and Axis allow partial withdrawals after 5 years and some after 7 years (such as SBI and HDFC).
Withdrawals under Sukanya Samriddhi Account, are allowed only after the girl child turns 18 years and can be used for higher education purpose.
Account maturity
The tenure for a PPF account is 15 years from the end of the financial year in which the account was issued. However, the depositor is allowed to withdraw the maturity amount, extend the tenure of the scheme and contributions. Whereas, a Sukanya Samriddhi Account will mature once the girl child reaches the age of 21 years. Partial withdrawal can be done in an SSY account after the age of 18 years that too only for higher education purposes.
Nomination Facility
A depositor can nominate someone under the PPF scheme but the same is not allowed for SSY depositors.
Loan facility
Loans can be availed under the PPF scheme but not under SSY.
On a Closing Note
Both the saving scheme has its own pros and cons and choosing between PPF and SSY is clearly a dilemma between more flexibility and better returns. PPF offers better flexibility and SSA provides you with higher returns. In any case, risk appetite doesn’t come into the scene, so you can clearly invest in both of them if you have surplus amount.
SCSS - Senior Citizen Savings Scheme
Senior Citizens Savings Schemes can be availed by any individual above the age of 60 years. They are effective savings options for the long term and offer attractive features and unmatched security.
SCSS Information
The Senior Citizens Savings Scheme (SCSS) was launched with the main aim of providing senior citizens in India a regular income after they attain the age of 60 years old. Some of the main benefits of the scheme are:
- Tax benefits are provided.
- Safe to invest in the scheme.
- Premature withdrawal is allowed.
- The account can be transferred across the country
- High interest rates are offered
The scheme comes with various security features and provides individuals with a savings option for the long run. The SCSS is available at post offices and certified banks across the country.
Process to Open an SCSS Account
An SCSS account can be opened at a bank or a post office. The process to open an SCSS account is mentioned below:
- Visit the nearest post office or bank branch.
- Submit the application form along with the KYC documents.
- A cheque for the amount that is being deposited must be provided.
- You can add nominees to the account.
SCSS Eligibility
The eligibility criteria for the SCSS are mentioned below:
- An individual who has attained the age of 60 years or above at the time of opening an SCSS account.
- Individuals who have attained the age of 55 years old, but are below the age of 60 years old and have retired on superannuation are eligible to open an SCSS account.
- Individuals who have attained the age of 55 years old and have retired before the implementation of the SCSS rules are eligible under the scheme.
- Non-Resident Indians (NRIs) are not eligible to open an SCSS account.
- Hindu Undivided Families (HUF) are not eligible to open an SCSS account as well.
SCSS Interest Rate
Currently, the SCSS interest rate is 7.4% p.a. The returns of the SCSS is high when compared to savings and Fixed Deposit (FD) accounts. On the first instance, the interest is payable on the deposit date of March 31, September 30, and December 31, thereafter, interest is payable on March 31, June 30, September 30, and December 31.
Quarterly interest is paid on the initial working day of April, July, October, and January. However, quarterly interest payments are available only at Core Banking enabled post offices.
Documents required to open SCSS account
Given below are the documents that individuals must submit in order to open an SCSS account:
- Two passport-size photographs
- Form A must be completely filled in and submitted.
- Identity proof such as Passport or Permanent Account Number (PAN) Card must be submitted.
- Individuals must submit proof of address such as Aadhaar Card or telephone bill.
- A document confirming the individual's age must be submitted. Age proof document can be the PAN Card, Voter ID, Birth Certificate, Senior Citizen Card, or Passport.
All the documents that are submitted to open an account must be self-attested.
SCSS Features
The main features of the Senior Citizens Savings Scheme are mentioned below:
- Maturity of the scheme: The maturity period of the scheme is 5 years. However, individuals can extend the maturity duration for 3 years by submitting an application in the required format within one year of maturity of the account. However, the account can be closed without any charges after the expiry of the account.
- Nominations: Nominations can be added to the policy at the time of opening an account or after the account has been opened.
- Number of accounts: Individuals are allowed to operate more than one account by themselves or open a joint account with their spouse. However, joint accounts can be opened only with the spouse and the initial depositor is the investor of the joint account.
- Minimum and maximum amount: Only a single deposit is allowed to be made in the account. It can be in the multiples of Rs.1,000 and the maximum amount that can be deposited is Rs.15 lakh. Deposit amounts less than Rs.1 lakh can be paid by cash, while amounts more than Rs.1 lakh must be paid by cheque. In case of cheque payments, the date the cheque realises will be the opening date of the account.
- Transfer of an account: An SCSS account can be transferred from a bank to a post office and vice versa. The process to open an SCSS account is also easy and hassle-free.
- Premature withdrawal: After one year of opening the account, premature withdrawal is allowed. However, a 1.5% charge and a 1% charge of the total amount deposited will be charged in case of premature withdrawals after 1 year and 2 years, respectively.
Tax benefits under the SCSS
Under Section 80C of the Income Tax Act, 1961, individuals are eligible for tax deductions on investments up to Rs.1.5 lakh. In case the interest generated is more than Rs.10,000 p.a., the tax will be deducted at source.
Process to Fill the SCSS Application Form - Post Office
The procedure to fill the SCSS application form in case you wish to open an account at the post office is mentioned below:
- Enter the branch name.
- In case you have a savings account at the post office, the account number must be entered.
- Enter the post office address.
- The name of the account holder must be entered.
- The next section must be filled if you want to open a savings account.
- Choose the type of account holder.
- Choose the type of account.
- In the section, details of the amount that is being deposited must be entered.
- Enter the account holder/holders' details.
- Choose the documents that you will be submitting.
- Enter nominee details in the next section.
No comments:
Post a Comment