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PPF vs SSY: Can you use your daughter's Sukanya Samriddhi account for your retirement savings?

The Financial Express logo The Financial Express 6 days ago Amitava Chakrabarty

Both Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) are government schemes meant for long-term investments. As the schemes are protected by government, they are fully secured. Moreover, investments in these schemes are eligible for tax benefits u/s 80C and the interest earned and maturity values are also tax free.

A man displays a new 2000 rupee note © SAJJAD HUSSAIN/AFP/Getty Images A man displays a new 2000 rupee note

However, the cap on maximum investments in a financial year is currently Rs 1.5 lakh for both PPF and SSY account.

There are cap on number of PPF and SSY accounts as well. A person may open only one PPF account in his/her name and only one account in the name of his/her minor child. Similarly, only one SSY account may be opened for a girl child till she turns 10 years old and a person may normally open SSY accounts for only two daughters.

The maturity period of an SSY account is 21 years from the date of opening, while the maturity period of a PPF account is 15 years. So, both PPF and SSY are long-term investments.

Apart from excellent security and tax efficiency offered on the investments in both PPF and SSY accounts, the government even gives relatively higher interest than prevailing fixed deposit (FD) rates on the money invested in both the schemes. In fact the SSY interest usually remains higher than the rate of interest of PPF.

For example, currently the rate of interest on SSY is 8.4 per cent, while that of PPF is 7.9 per cent. On the other hand, most banks offer less than 7 per cent interest rates on long-term FDs.

So, both PPF and SSY are long term accounts and both have annual investment limit of Rs 1.5 lakh, but interest on SSY is 0.5 per cent higher than that of PPF.

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As a result, one may think of using his/her daughter's SSY account for additional investment over the PPF limit for accumulation of higher retirement corpus.

But can it be possible? For the answer, we have to study the basic differences in the two schemes.

Although both PPF and SSY accounts look similar in terms of term of investment, lucrative interest rates, security and tax benefits, but there are some basic differences that make SSY ineligible for accumulation of retirement corpus.

Firstly, you may extend the tenure of your PPF account by 5 years successively, after the maturity period of 15 years. So, you may keep on extending your PPF account till you retire. On the other hand, 50 per cent of balance may be withdrawn from SSY account, once the girl turns 18 years old.

Moreover, an SSY account can't be extended beyond 21 years from the date of opening or marriage of the girl after 18 years of age, whichever is earlier.

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The fundamental difference between an SSY account from PPF account is that, you may open an SSY account for your daughter and make contributions, but you don't have the right to withdraw money from it. Your daughter will get full control of the SSY account after she turns 18 years old.

So, the money in the SSY account is your daughter's money and you can't use it to build your retirement corpus.

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