An alternative available to Public Provident Fund (PPF) now

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Apurv Patel, MBA 2014-16, Vinod Gupta School of Management, IIT Kharagpur

Government has recently launched a new scheme sukanya samriddhi account, which like Public Provident Fund (PPF) is intended to provide means of making savings to cater to future needs of children. Here are some important facts to know about the sukanya samriddhi sccount, which can be availed only in name of a girl child.

  1. Sukanya samriddhi account can be opened in name of a girl child not older than 10 years.
  2. An investment of up to Rs. 1.5 lakh can be made per account per year whereas in PPF, the limit is Rs. 1.5 lakh for all accounts combined.
  3. Sukanya samriddhi account can be closed when girl reaches the age of 21. If not closed after this maturity period, the balance will keep earning interest.
  4. Sukanya samriddhi account allows deduction in tax upto Rs. 1.5 lakh.
  5. As opposed to PPF, sukanya samriddhi account does not allow partial withdrawal.
  6. The interest rate for sukanya samriddhi account will be decided anew for each financial year. For 2014-15, sukanya samriddhi account is fetching higher interest than PPF.

Considering these features of sukanya samriddhi account, I believe sukanya samriddhi account is similar to PPF in some ways but there are a couple of critical differences between them. I think the PPF is more flexible as it allows partial withdrawal facility whereas sukanya samriddhi account does not but it is providing higher returns than a PPF account.

So I think it’s essentially a tradeoff between flexibility and slightly higher returns as far as PPF vs sukanya samriddhi account is concerned. It’s nice however that there is a healthy option available to the consumers other than PPF for savings purposes.



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