SSA vs. Recurring Deposits RD

Ever since Sukanya Samriddhi Yojana has been launched, at least parents and legal guardians of girl child in India have started questioning and comparing SSA with other modes of long term investment.  This is quite logical as well, since if SSA can offer a good investment return in secure the future of a girl child, why do we need to go with any other form of investment.

The ultimate question or parameter on which a lot of people are comparing RD with SSA is why they should lock their moneys for so long if they have option of recurring deposit investment.  In this article, we would ponder on every possible comparison between Sukanya Samriddhi Account and Recurring Deposit that would help you come to a personal conclusion.

Before we actually start comparing between the two, it is noteworthy to mention here that both the investments come from different genre.  SSA is a specific investment scheme custom made for the financial security of the girl child, however Recurring Deposit is a short term general investment offered by financial institutions.

In terms of Eligibility

Only girl children below the age of 10 years are eligible for Sukanya Samriddhi Account.  The scheme is not for girl children who or whose parents are NRIs.  On the other hand, Recurring deposit is for every one of any age group and NRIs too can opt for this scheme.

Nature of Account

Only one SSA account can be opened for the account holder under the scheme.  However, RD can be opened in any numbers.  A person can have more than 1 RD accounts.  Both RD and SSA can be opened in any banks and post offices, however, NRIs are allowed to open their RD accounts only in banks and not in post offices.

Purpose of Scheme

Both the schemes of investment come to serve different purpose altogether.  SSA is a long term investment scheme for higher education and marriage of a girl child, whereas, RD may solve short terms purposes like buying car, meeting small educational cost of children, buying expensive household items, etc.

Tenure of Investment

SSA is a longer term investment whereas RDs are for short durations.  Moreover, the tenure for SSA is fixed for 21 years, whereas RDs can be for any term between 6 months to 10 years.  You can choose the tenure of your recurring deposit from the options available.  You can choose the tenure of SSA investment.

Minimum and maximum investment

The minimum investment in SSA is Rs 1,000 per fiscal year with a maximum of Rs 1.5 lakh per fiscal year.  In case of Recurring Deposits, the minimum deposit per month is at least Rs 100 with no limit on the maximum deposit amount.

Penalty on non-payment of contribution

If you do not pay the minimum amount of Rs 1,000 in SSA, the account would be charged with a penalty of Rs 50 per year.  However, in case of RD, the penalty may range from Rs 1.50 to Rs 2.0 for every Rs 100 contribution per month.

Rate of Interest

The rate of interest for both the modes of investment are decent with Sukanya Samriddhi Account offering the highest rate of interest in terms of small saving.  SSA is currently offering an interest rate of 9.2%, whereas interest rates in RD are at 8.4% for the plans chosen between 1 to 5 years of investment.

Rate of interest in terms of SSA is compounded yearly, whereas the interest rate in recurring deposits is compounded quarterly.  This is a major difference among the two of them.

Tax Benefits on investment

This is one aspect on which SSA overpowers other forms of investment.  The contributions, interest as well as the maturity proceeds in SSA are fully deductible under section 80C of Income tax.  On the other hand, the contributions and proceeds in RD are taxable. Only RD accounts in case of minor are deductible under section 10(32) of income tax.

Loan against investment

No loan is permissible in case of Sukanya Samriddhi Account.  However, in case of recurring deposits, a loan of up to 90 per cent of the available balance can be taken.

Last but not the least, there is no premature withdrawal permissible in Sukanya Samriddhi Account.  If you are investing in RD, you can opt for premature withdrawal with a penalty clause of 1%.  The rate of interest for recurring deposit may vary from one bank to another, but not much.

While we compare both these saving schemes, we should understand that both have their own objective of providing financial security in special cases.  If you want to secure the future of your girl child, even an investment of few thousand an year can turn out to be a decent amount when your daughter is old enough for marriage or higher education.