ARTICLES

As parents, one of your greatest responsibilities is to secure your child's financial future. In a country like India, where the cost of education and other expenses are rising rapidly, planning for your child's future becomes even more crucial. Fortunately, the Indian government offers several investment instruments that can help you build a strong financial foundation for your child. 

In this article, we'll explore three savings instruments – National Saving Certificate (NSC), Public Provident Fund (PPF), and Sukanya Samriddhi Yojana (SSY) – designed to provide financial security for your little ones.

National Saving Certificate (NSC):

The National Saving Certificate is a government-backed savings instrument that not only offers attractive returns but also comes with a reliable safety net. NSC is a fixed-income investment with a lock-in period of 5 years, which means you cannot withdraw the amount until this period elapses. The interest rate is revised periodically, and the current rate is 7.7% p.a. Investment in NSC qualifies for tax deduction under Section 80C of the Income Tax Act, making it a tax-efficient choice.

Public Provident Fund (PPF):

PPF is a long-term investment scheme offered by the Indian government that is perfect for securing your child's education and future needs. It combines savings and tax benefits, making it an ideal choice for risk-averse parents. 

PPF has a tenure of 15 years, but you can extend it in blocks of 5 years after maturity. To keep your account active, you must make a payment of at least Rs 500 each year. The current interest rate is 7.1% p.a. and the interest rates are revised every quarter. Your contributions to PPF are eligible for tax deduction under Section 80C, and the interest earned is tax-free.

Sukanya Samriddhi Yojana (SSY):

SSY is a unique and empowering scheme launched by the government to secure the financial future of the girl child. With attractive interest rates and tax benefits, SSY is a must-have for every parent with a daughter. 

SSY offers an impressive interest rate, which is revised every quarter, and the current rate is 8% p.a. The account matures after 21 years from the date of opening, which makes it an excellent choice for long-term financial planning for a girl child's education or marriage. To keep your account active, you must make a payment of at least Rs 250 each year. Contributions to SSY are eligible for tax deduction under Section 80C.

How to open your child's account? 

Opening a minor account for your child in any of the three schemes mentioned above is a simple and quick process-

• As a parent or legal guardian, you can visit a designated bank or post office with your child's birth certificate, your identity proof, and address proof to initiate the account opening.

• The minimum deposit required for each scheme is Rs. 1000 for NSC, Rs. 500 for PPF, and Rs. 250 for SSY.

Withdrawal Process:

• Once your child reaches the age of 18, you can convert the minor account into a major account.

• To transfer the account from the guardian's control to your child’s control, you need to fill out an application with some necessary documents and the signature of the now-adult account holder.

• The guardian who originally opened the account also needs to sign and confirm the application.

• This should be done immediately after the child turns 18 to avoid any hiccups at the time of withdrawal. With the account now in your child's name, they can independently manage and make financial decisions, setting them on the path to a secure and prosperous future.

However, each scheme has its own rules and procedures about how you can withdraw the amount upon maturity. 

National Savings Certificate (NSC) 

• When your NSC matures, visit the post office or bank where you hold the certificate with the NSC certificate, withdrawal application form, and valid ID proof.

• Submit the documents to initiate the withdrawal process.

Note: Premature withdrawal of the NSC can be done under the following circumstances:

If the NSC holder or holders (in the case of joint holders) pass away, If any order is given by the court of law, if a Gazetted Government Officer pledges for the account to be forfeited, and the pledge is in compliance with NSC rules.

Public Provident Fund

PPF has a lock-in period of 15 years. After this period, you can make partial or complete withdrawals without penalties. From the 7th year onwards, you can make partial withdrawals once every financial year, subject to certain limits.

Here’s how: 

• To withdraw, visit the bank or post office where you hold your PPF account and fill out the PPF withdrawal form.

• Submit the necessary documents, including your PPF passbook, ID proof, and the withdrawal form.

• You can withdraw up to 50% of the balance at the end of the 4th year immediately preceding the year of withdrawal, or the balance at the end of the preceding year, whichever is lower.

• Upon maturity after 15 years, you can withdraw the entire balance without any restrictions.

If you want to continue the account after maturity, you can extend it in blocks of 5 years.

Sukanya Samriddhi Yojana 

The SSY account has a maturity period of 21 years from the date of opening. You can withdraw the entire amount when the account matures. 

Partial Withdrawals can be done after the girl child attains 18 years of age However, the amount is limited to 50% of the balance at the end of the preceding financial year. You can do it for:

• When the girl child reaches 18 years or is in 10th standard, whichever is earlier, you can withdraw up to 50% of the balance for her education.

• For the girl child's marriage, you can withdraw up to 50% of the balance once she turns 18 or completes the 10th standard, whichever is earlier.

To make a withdrawal, visit the post office or bank where the SSY account is held. Submit the SSY passbook, the withdrawal application form, and valid identification proof.

Secure your child's financial future

By investing in investment products like National Saving Certificate, Public Provident Fund, and Sukanya Samriddhi Yojana, you can ensure that your child's dreams and aspirations are backed by a robust financial foundation.

Remember to start early, make informed decisions, and take advantage of the tax benefits these schemes offer. With careful planning and foresight, you can pave the way for your child's bright and prosperous future.