Sukanya Samriddhi Scheme Vs NPS Vatsalya: How These Two Savings Schemes For Children Differ

NPS Vatsalya and the Sukanya Samriddhi Yojana (SSY) are among the government’s flagship investment schemes for children’s financial security and overall wellbeing. While the former is open to both genders, the latter caters exclusively to the girl child. Also Read: 6 Drawbacks Of Senior Citizens Savings Scheme (SCSS) You Should Know However, there are several similarities and dissimilarities in the two schemes.

NPS Vatsalya

This scheme allows parents or guardians to open an NPS account on behalf of a minor child. NPS Vatsalya accounts can be transferred to the children upon reaching adulthood or 18 years of age. The scheme helps them instill the saving habit while promoting financial literacy and responsibility. The minimum monthly contribution in NPS is Rs 500 and the minimum yearly contribution is Rs 6,000. NPS funds are invested in the market that allows them to seize the compounding growth. One can contribute to the scheme monthly or annually.  

Sukanya Samriddhi Yojana

The SSY account is exclusively for the girl child. The parents or guardians can open the account on behalf of a minor child. However, it allows for a maximum of two accounts per family, provided they are girl child. Twins and triplets born in first or second pregnancy are also eligible. One can open the account in any bank or post office. The minimum deposit in the scheme is Rs 250 and the maximum is Rs 1.50 lakh in a financial year. Deposits can be made up to 15 years from the account opening date. The account will be suspended if the minimum deposit is not maintained, but can be revived after paying the minimum amount plus Rs 50 as penalty. Here is a comparison of the different features of the schemes.

Objective

Both NPS Vatsalya and Sukanya Samriddhi Yojana allow parents or guardians to open and invest on behalf of their minor children. Prime Minister Narendra Modi launched the SSY scheme on January 22, 2015, as part of the Beti Bachao Beti Padhao Campaign, which aims to encourage families to invest in education of girl child and save for their marriage.

Tax Benefit

SSY contributions qualify for deductions up to Rs 1.5 lakh in a financial year under Section 80C, while the maturity and interest income are also tax-exempt under the Income Tax Act. Likewise, NPS Vatsalya allows deductions up to Rs 1.5 lakh under sections 80C, 80CCC, and 80CCD (1), and Rs 50,000 under Section 80CCD (1B), totalling Rs 2 lakh.  

Return Rate

While NPS works on a market-linked return strategy, SSY offers a fixed annual interest rate 8.2 per cent, starting January 1, 2024, and is calculated on a yearly basis.

Maturity Period

NPS Vatsalya account can be transferred to children after they turn 18, while SSY account can only be closed after 21 years from opening or at the time of a girl child’s 18th birthday or after marriage, provided it is closed one month before or 3 months after marriage. Also Read: Senior Citizen FDs: 5 Tips To Invest In Fixed Deposits Smartly

Premature Closure

The SSY account can be prematurely closed after 5 years of opening under certain conditions, including the account holder's death, extreme compassionate grounds, life-threatening decease, or death of the guardian, and requires submitting proper documents. To close the account, one must submit a prescribed application form and the passbook at the concerned post office. On the other hand, pre-mature exits are allowed in NPS during voluntary closure, dismissal, or removal from job by the government or the employer. If the corpus is less than Rs 2.50 lakh, the entire corpus can be withdrawn as lump sum.

Partial withdrawal before Maturity

NPS allows partial withdrawals in case of a death in the family, serious disease, wedding of self, children, home renovation, etc., where the withdrawal limit is defined for each case. In the case of SSY, one can withdraw up to 50 per cent of the accumulated funds in lump sum or instalments when the girl child reaches 18 or passes 10th standard.

Key Difference in NPS Vatsalya and SSY

 

Key Differences

NPS VatsalyaSukanya Samriddhi YojanaNPS Vatsalya can be opened for children of any genderSSY can only be opened for a girl childNPS promotes financial literacy and instils saving habit.SSY encourages families to invest in education of girl child.NPS offers up Rs 2 lakh tax deduction under Section 80C, 80CCD and Section 80CCCSSY offers deductions up to Rs 1.5 lakh under Section 80C of the Income Tax ActProvides market-linked returnsProvides fixed 8.2% returnsCan be converted into a normal NPS account after the child reaches 18  The maturity period is 21 years or when the girl turns 18 or gets marriedPartial withdrawals are allowed with defined limitsPartial withdrawals are allowed if the girl has passed 10^th grade or has reached legal age.  Premature closure is allowed.Premature closure is permitted under specific conditions such as death or life-threatening diseases, etc.This account can be opened for any number of children in the familyThis account can be opened for maximum of two girls in a family. Provided in case of twins/triplets girls birth more than two accounts can be opened.