Viidyes Totare, Director Archers Wealth Management Pvt Ltd
You can choose between Equity Linked Saving Scheme (ELSS) and Sukanya Samriddhi Yojana (SSY) depending on your risk appetite and financial requirement. To determine which option will be better for you, consider the below-mentioned features.
Equity Linked Saving Scheme
The features of ELSS are:
1. You can invest systematically for a tenor of 3 years with a minimum deposit amount of Rs. 500 per month.
2. Any long-term capital gain or dividend earned from ELSS is tax-free up to Rs. 1 Lakh.
3. You can invest in two types of investments such as dividend pay-out or growth funds depending on your financial requirement.
4. The returns depend on the equity market for which you can enjoy substantial returns.
5. ELSS provides you with the lowest lock-in period of 3 years.
6. It does not hold a specified maturity date, and you can invest as long as required.
Sukanya Samriddhi Yojana
This scheme was launched to help the parents of a girl child to save money for her education and marriage. The features of Pradhan Mantri Sukanya Samriddhi Yojana are:
1. The account can be opened for any girl child below the age of 10 years.
2. SSY accounts get matured only after the primary account holder (girl child) attains the age of 21 years.
3. Only one account can be opened per girl child and two per family.
4. The minimum and maximum amounts that you can invest in Rs. 250 and Rs. 1.5 Lakh per year.
5. Primary account holders can opt for partial withdrawal of up to 50% of the balance after attaining the age of 18 years.
Both ELSS and Pradhan Mantri Sukanya Samriddhi Yojana allow you to claim tax benefits of up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act.
Abhinav Angirish, Founder, Investonline.in
A couple experiences a life-changing event when their child is born. Celebrations provide happiness, but also a great deal of responsibility. The welfare of your child becomes your top priority the moment you become a parent. Your goal as a parent should be to give your child the best possible start in life, and that includes providing them with a solid education.
Early savings are crucial for creating a corpus for your child’s schooling. If you want to make sure that your savings will be sufficient to cover the costs of living in 20 years from now, you need to choose an investment choice that takes into consideration the steadily increasing rate of inflation.
Many debate about Equity Linked Savings Scheme (ELSS) vs Sukanya Samruddhi Yojna (SSY). Both have different goals. Equity linked savings system is known as ELSS. Under Section 80 C, it can be utilized to save money on taxes up to Rs.1.5 lakh. Sukanya Samriddhi Yojana, on the other hand, is explicitly for the benefit of girls’ education. In order to plan effectively, you must first consider your goals. They are both entirely dissimilar. Under ELSS, there is a lock-in period of three years, whereas in SSY, you will receive a lump sum payment when your girl child turns 18 and is prepared for education or marriage.
Sukanya Samridhi Yojna is for 21 years. For example, if you begin your scheme when your child is 9 years old, your money will mature when your daughters are 30 years old, which is too late for the goal you have in mind. However, if you begin this plan at the age of one year, your savings will reach maturity at age 22, which is advantageous for girls.
On the other hand, historically, ELSS funds have returned 15% annually, on average. Overall, when compared to conventional tax-saving products, ELSS offers more liquidity. The long-term capital gains (LTCG) from ELSS mutual funds would only be taxed at 10% if your total capital gain in the financial year of withdrawal exceeds ₹1 lakh. Long-term capital gains tax is not required to be paid if your annual earnings are less than Rs. 1 lakh.
A similar SIP invested in an equity mutual fund (for example) could be advantageous because its returns could be better than those from SSY. In addition, there is no lock-in period or penalties for early redemption in the event that you change your mind about your investment strategy or a crisis arises. Start a Systematic Investment Plan (SIP) in an Equity Linked Savings Scheme (ELSS), which has the same comparable tax advantages as SSY but requires a 3-year lock-in period.
Manas Chugh, Chartered Accountant
Equity Linked Savings Scheme (ELSS) is a tax saving scheme under which the amount is invested in market linked funds with a lock in period of 3 years. As the invested amount is allocated towards equity or equity linked securities, it can possibly generate higher returns in comparison to fixed income securities. Since the exposure of allocated assets is in the market, the risk of investment is considered to be high. There is no limit on the investment amount.
Sukanya Samriddhi Yojana (SSY) is a government sponsored investment for female children with a maximum age of 10 years. The account is opened in the name of the parent/guardian with a maximum amount to be invested in 1.5 Lakhs. SSY provides a fixed interest rate which is currently 7.60% compounded annually. This interest rate is reviewed quarterly. The lock in period for SSY is 15 years but matures after the attainment of the age of 21 years. Tax benefit under Section 80C is also available. The return offered is superior to other fixed income securities.
Therefore, from the past return on investment, ELSS generally offers a better return on investment but with higher risk. In addition, the lock-in period is only 3 years under ELSS whereas it is 15 years in case of SSY. In both schemes, taxation benefit is available under Section 80C. For a person having risk taking ability, should invest in ELSS as it offers a higher level of return and greater flexibility on lock in and investment amount.