Sukanya Samriddhi Yojana: Missing this monthly deadline can shrink returns

Depositing after the 5th of the month may cost SSY investors interest and reduce final corpus through lower compounding

A delay of just a few days in depositing money into a Sukanya Samriddhi Yojana (SSY) account could reduce the amount accumulated over the long term. 

While investors often focus on the scheme's attractive interest rate and tax benefits, the timing of contributions also plays an important role in determining the final corpus. 

According to the Sukanya Samriddhi Account Scheme rules, deposits made after the fifth day of a month do not earn interest for that month. Although the loss in a single month may appear small, repeatedly missing the deadline can affect long-term compounding and lower the maturity value of the account.

Why the 5th of the month is important for SSY?

According to the scheme's interest calculation provisions, interest is calculated on the lowest balance in the account between the close of the fifth day and the end of the month. While interest is credited at the end of every financial year, the calculation is carried out on a monthly basis. 

This means deposits made on or before the fifth day of a month are considered for interest calculation during that month. However, if the contribution is made on the sixth day or later, the amount starts earning interest only from the following month. 

For investors making regular monthly contributions, this rule can influence overall returns. For example, if a parent contributes Rs 12,500 every month and the deposit is credited after the fifth day, the contribution may miss out on roughly Rs 85 of interest for that month at the current interest rate of 8.2 per cent per annum. 

The amount may seem insignificant in isolation. However, according to the scheme's compounding structure, the missed interest also loses the opportunity to generate future returns, which can gradually reduce the maturity corpus over time.  READ | EPF withdrawal rules explained: When can you withdraw 100% of your corpus?

What is Sukanya Samriddhi Yojana?

 

According to the National Savings Institute, Sukanya Samriddhi Yojana is a government-backed small savings scheme designed to encourage long-term savings for a girl child. The scheme is among the most popular savings options because it offers guaranteed returns backed by the sovereign and provides tax benefits. 

Key features include:

• The account can be opened for a girl child below 10 years of age.
• A parent or legal guardian can open and operate the account.
• The minimum annual contribution is Rs 250.
• The maximum annual contribution is Rs 1.5 lakh.
• The current interest rate is 8.2 per cent per annum.
• Deposits can be made for 15 years from the date of opening.
• The account matures 21 years after opening.

According to the Income Tax Act provisions applicable to the scheme, SSY enjoys Exempt-Exempt-Exempt (EEE) status. Deposits qualify for deduction under Section 80C, while interest earned and maturity proceeds remain tax-free, subject to prevailing rules.

Why compounding makes the rule important

The scheme's long-term appeal lies in the power of compounding. According to SSY rules, interest earned remains invested in the account and continues to earn further interest until maturity. 

For this reason, even a small amount of missed interest can have a larger effect over time. 

When a contribution misses a month's interest because it was deposited after the fifth day, investors lose not only that month's return but also the future earnings that amount could have generated over the remaining tenure of the account.

  Over a 15-year contribution period and a 21-year account tenure, these missed opportunities can accumulate into a noticeable difference in the final corpus.

Other rules investors should keep in mind

According to the Sukanya Samriddhi Account Scheme rules:

 

• A minimum deposit of Rs 250 must be made every financial year to keep the account active.
• If the minimum contribution is not made, the account becomes irregular and can be revived by paying a penalty of Rs 50 per default year along with the required minimum deposit.
• Deposits above Rs 1.5 lakh in a financial year do not earn interest.
• Up to 50 per cent of the eligible balance can be withdrawn after the girl turns 18 for higher education.
• Premature closure is permitted in specified circumstances, including marriage after the age of 18, subject to prescribed conditions.

How investors can maximise returns

 

According to financial planners, a simple way to maximise returns under SSY is to ensure deposits are made before the fifth day of every month. 

Investors can also consider:

• Setting up automatic transfers through banks or post offices.
• Making contributions early in the financial year whenever feasible.
• Tracking annual deposits to ensure the account remains active and within prescribed limits.