PPF or Sukanya Samriddhi Account Scheme? Which is a better option?
Question: As per my knowledge, after the initial tenure of 15 years a PPF account can be extended for 5 years at a time but not more than three time. So if I open a PPF account in the name of my daughter today who is 5, her account will mature mandatorily when she turns 35 of her age. So I feel that when she starts earning, PPF will not be an option for her at that time. Which is a better option PPF or Sukanya Samriddhi Account Scheme (SSAS) as both offer long term saving strategy? Rahul
Answer: As per the PPF Scheme 2019, there are no restrictions as to the number of times a PPF account can be extended for a block of five years at a time as long as the account holder is a resident of India after its initial tenure of 15 years. So your information about number of times a PPF account can be extended is incorrect. Moreover, there is no restriction on one opening another PPF account after existing one has matured and has been closed.
Sukanya Samriddhi Account Scheme (SSAS) is a better option as it offers a higher interest rate of 7.6% against 7.1% offered by PPF account. However, there is other side to the coin. Since you wish to accumulate this money for a longer time i.e. beyond 35 years of age of your daughter, PPF is a better option because it can be extended for any number of block of five years but account under SSAS has to be compulsorily closed after 21 years of opening.
Since there is a limit of Rs. 1.50 lakh upto which you can deposit money in a PPF account every year, you will face problem in deploying the maturity proceeds of SSAS in any other tax free investment avenue. So do your calculations and decide where you want to put the money based on whether you will use the money in SSAS for education and marriage of your daughter or not or you just want to accumulate long term corpus for her.
Please note, you can open account under both the schemes and put money major money in SSAS as long as it is offering higher rate of interest after taking into account the money which you may need for her education and marriage.
Balwant Jain is a tax and investment expert and can be reached at [email protected]
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