Sukanya samriddhi vs recurring deposit: Which is better?
What's the story
In India, two popular savings schemes for long-term financial planning are the Sukanya Samriddhi Account and recurring deposits. Both of them have their own benefits and can help you secure your daughter's future or meet short-term savings goals. Knowing the differences between these schemes can help you make an informed decision according to your financial goals. Here's a look at the two.
#1
Sukanya Samriddhi Account benefits
The Sukanya Samriddhi Account is a government-backed initiative aimed at securing the future of a girl child. It offers an attractive interest rate, which is currently higher than most other savings options. The minimum annual deposit required is ₹1,000, making it accessible for many families. Additionally, contributions to this account qualify for tax deductions under Section 80C of the Income Tax Act.
#2
Recurring Deposit advantages
Recurring deposits (RDs) are offered by banks and post offices, allowing you to invest a fixed amount every month for a specified tenure. RDs provide guaranteed returns at predetermined interest rates, which are usually lower than those of SSAs but higher than regular savings accounts. They offer flexibility in terms of tenure, ranging from six months to ten years, depending on the institution.
#3
Comparing interest rates
Interest rates on Sukanya Samriddhi Accounts are currently at around 7.6%, which is significantly higher than most recurring deposit rates that hover between 5% and 7%, depending on the bank and tenure chosen. However, SSAs also come with the condition that funds cannot be withdrawn until the girl reaches 21 years of age, except for higher education expenses.
Tip 1
Tax implications and deductions
Contributions made towards a Sukanya Samriddhi Account are eligible for tax deductions under Section 80C up to ₹1.5 lakh per financial year. This is not the case with recurring deposits, which do not offer similar tax benefits on principal amounts deposited each month or quarter over time. However, interest earned from RDs is taxable as per income tax slabs applicable to individuals concerned.