The interest rates on Post Office schemes have been cut by 0.1 per cent in the second quarter of 2019. However, the Post Office Small Savings Schemes still offer high rates compared to similar products offered by other financial institutions, and that too with Sovereign guarantee from the Government of India.
Along with the Sovereign guarantee, schemes like PPF and Sukanya Samriddhi Yojana (SSY) also provide tax benefits at every steps – the investment amount is eligible for deduction u/s 80C and the interest and maturity amounts are tax-free as well – that makes these schemes EEE (Exempt, Exempt, Exempt) one. The current rate of interest offered on SSY accounts is 8.4 per cent per annum
Part of the government’s ‘Beti Bachao Beti Padhao’ campaign, the scheme was launched in January 2015 and parents or legal guardians of a girl child may open an account either in Post Office or in an authorised scheduled commercial bank till the girl turns 10 years old and deposit up to Rs 1,50,000 in the account in a financial year. Only one SSY account may be opened for a girl child and maximum amount of deposit cannot exceed Rs 1.5 lakh per financial year.
Aimed to support education expenses of a girl, the duration of the scheme is 21 years, however maximum 50 per cent partial withdrawal is allowed after the girl attained 18 years of age. In case the girl gets married after 18 years of age, the account may be closed before the maturity period of 21 years and the entire amount may be withdrawn. Although the maturity period of an SSY account is 21 years, deposits are to be made for only 15 years.
Assuming that the current annual interest rate of 8.4 per cent will continue for the entire investment period, if Rs 1,50,000 is deposited in the beginning of every year in SSY account of a new-born girl child for 15 years, maturity amount of over Rs 73.9 lakh may be generated in 21 years.
Although the amount invested in an SSY is fully secure due to Sovereign guarantee, but there is interest rate risk involved as the rate is revised every quarter. For example, the current interest rate of 8.4 per cent per annum is 0.8 per cent less than the highest interest rate of 9.2 per cent offered on SSY at the beginning of the financial year 2015-16.