Best Investment Plan for Girl Child in India

What are the Best Investment Options Available for the Girl Child?

The best investment options available for the girl child include a mix of government-backed and market-linked instruments. These tools, if used correctly, can ensure that your girl child’s future and all her financial endeavours are secure.

The following table lists the best investment options for a girl child in India.

Details About the Best Investment Plans for Girl Child

Let's discuss these in more detail:

• 1. Sukanya Samriddhi Yojana Scheme

     Sukanya Samriddhi Yojana is a government-backed small savings scheme launched as a part of the "Beti Bachao, Beti Padhao" campaign to promote the welfare of the girl child in India. It allows parents to invest small amounts of money regularly for 15 years. These investments further earn interest, and the final corpus is released to the child when she turns 21 years old. Features of Sukanya Samriddhi Yojana:

     • Eligibility: Girl-child of ages 10 and below are eligible to enrol under this scheme.
     • Investment amount: You can start investing in the scheme with as little as ₹250 annually. The maximum amount you can invest annually is ₹ 1 lakh.
     • Maturity: You have to invest in the scheme for 15 years. The account matures when your child turns 21 years old.
     • Interest Rate: Currently, the scheme offers an interest rate of 8.2%, which is compounded annually. The rate is also reviewed and revised by the government every quarter.
     • Premature withdrawals: You can make premature withdrawals for financial needs once your child turns 18 or passes class 10th.
     • Taxation: With its EEE status, contributions made towards the Sukanya Samriddhi Yojana are eligible for tax deductions under Section 80C of the Income Tax Act, up to a maximum of Rs. 1.5 lakh per financial year. The status also ensures that your interest and maturity are completely tax-free.

  2. Unit Linked Insurance Plan (ULIP)

     A Unit Linked Insurance Plan (ULIP) is a unique financial tool that provides the investor the dual benefits of insurance and investment. It provides individuals with the opportunity to secure the financial future of their family while simultaneously facilitating market-linked returns through the various kinds of funds it offers.

     Features of ULIP:

     • Life cover: ULIPs are designed for protection. Thus, they are available to individuals with a built-in life cover. This life cover ensures that your family remains financially secure irrespective of your presence.
     • Investment: ULIPs directly let you step into the market and invest your funds. You can directly invest in the market through the various funds offered by a ULIP. Your tenure of investment, combined with the fund of your choice, dictates your final corpus. You can use a ULIP calculator to calculate your expected returns.
     • Funds: Funds are your way into the market. Different ULIPs offer different funds which cater to different financial goals and risk appetite. You can choose between high-risk but high-benefit equity funds or low-risk yet low-benefit debt funds as per your risk appetite and your financial goal.
     • Lock-in period and Partial withdrawals. ULIPs generally have a lock-in period of 5 years. You cannot surrender your plan or make any withdrawals during this period. However, you can make partial withdrawals after the 5-year lock-in period of your ULIP is complete
     • Taxation: ULIPs also provide the investor with tax benefits. Your premiums are eligible for tax deductions under Section 80C of the Income Tax Act. You can also claim a tax-free maturity as per the existing tax laws of India.
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• Post Office Term Deposit

  Post Office Term Deposits are fixed deposits offered by the Post Office and are highly popular in India due to their accessible and secure nature. A post office term deposit allows you to invest a lump sum amount for a particular period of time, which earns interest as per the declared interest rates of the post office.

  Features of the Post Office Term Deposit in India:

  • Flexible: The tenure of your post office term deposit can range from an year to five years.
  • Investment amount: You can start a Post Office term deposit with ₹1000. There is no upper cap to the amount you can invest.
  • Lock-in period: You can only make a withdrawal after 6 months of depositing your capital.
  • Pledging: A POTD account can be pledged or transferred as security. To do so, investors need to submit the prescribed application form at the concerned Post Office, along with an acceptance letter from the pledgee.
  • Accessible: all public sector banks, as well as select private banks such as ICICI Bank, Axis Bank, and HDFC Bank, have been authorised to allow investors to open POTD accounts.
  • Taxation: Tax deduction eligibility under Section 80C for 5 Year Time Deposits.

• National Savings Certificate (NSC)

  National Savings Certificate (NSC) is a savings scheme backed by the government which aims at promoting savings in small and medium income households. You can enrol under this scheme through your closest post office.

  Features of NSC:

  • Fixed returns: NSC currently offers an interest rate of 7.7%, which is compounded annually. These rates are fixed and reviewed by the government on a quarterly basis.
  • Taxation: NSC enjoys the EET status. This means that your principal is eligible for deductions under Section 80C of the Income Tax Act. Along with deductions, the EET status also allows you to earn tax-free interest on your principal. Only your maturity amount is taxed as per the tax laws.
  • Investment amount: You can start investing with only ₹100 and can invest as per your convenience since the scheme has no upper limit.
  • Accessible and transferable: You can visit your nearest Post Office branch and enrol under the NSC scheme. Your NSC account can also be transferred to any other post office across india in case your address changes.
  • Nomination: Investors can nominate a family member, even a minor, to inherit the NSC in case of an unfortunate event of the investor's demise.
  • Maturity: The investor receives the entire corpus value on maturity.

• Post Office Recurring Deposit Scheme.

  Post Office Recurring Deposit is a savings and investment option that is offered by the Post Office. A Post Office RD allows you to invest a fixed sum of money every month, which earns a fixed interest rate. The scheme not only acts as a safe investment option but also, through the power of compounding, can earn you a good corpus for your girl child. Features of the Post-Office Recurring Deposit Scheme:

  • Interest rate: The current interest rate is fixed at 6.2%. This interest rate is compounded in a quarterly manner.
  • Tenure: The tenure for a Post Office RD is fixed at 5 years.
  • Investment amount: The minimum monthly deposit required to open an RD account is Rs. 100. There is no maximum limit to how much you can invest in a Post Office RD.
  • Penalty: If a deposit is missed, a penalty of Rs. 1 will be charged for ₹100 denomination account
  • Rebate: The scheme provides a rebate for advance deposits of at least six instalments. For a denomination of Rs. 100, a rebate of Rs. 10 is given for a 6-month deposit and Rs. 40 for a 12-month deposit.
  • Transferability: Post Office RD accounts can be easily transferred from one post office to another.

• Fixed Deposits

  A fixed deposit is one of the most regularly and popularly used tools of investment. It allows you to deposit a lump sum of money for a fixed period of time. This sum of money earns a fixed rate of interest throughout the duration of the term of the FD. Features of Fixed Deposits

  • Interest Rate: The average fixed deposit rate across banks ranges between 2.50% and 8.10% per annum. These rates vary as per the bank of your choice.
  • Flexible tenure: FDs are highly flexible as they let you invest for as little as 7 days. For a long-term investment, you can invest for up to 10 years in the FD.
  • Compound interest: The invested amount earns compounded returns periodically, such as quarterly, annually, or monthly.
  • Flexibility: Partial withdrawals are allowed under FDs. However, penalties as per your bank's terms and conditions are levied on your withdrawals.
  • Maturity: Upon maturity, the maturity amount can be reinvested for continued growth.
  • Loan facility: FDs are also highly useful during emergencies. You can easily avail a loan against an FD.

• Public Provident Fund

  A Public Provident Fund is a long-term investment scheme backed by the government. It has a long window of investment and is best for parents who wish for a risk-free, long-term investment which is also able to earn them a good corpus.Features of PPF

  • Investment amount: You can start with the minimum investment of ₹500 and can invest up to ₹1.5 lakh per annum
  • Tenure: The minimum tenure for a PPF is 15 years; you can further extend it in blocks of 5 years.
  • Deposit frequency: At least one instalment per year is mandated for the PPF to remain active.
  • Loan Facility: You can avail a loan of up to 25% of your fund value provided that you have sustained the payment of premium for at least 3 years.
  • Account Closure Option: You can close your PPF account if you're not able to sustain regular investments.
  • Protection from Debt Attachments: Any debts you have cannot be attached to a court order against your PPF account.
  • Tax benefit: A PPF enjoys the EEE status. This means that your premiums are eligible for deductions. Along with deductions, the interest earned on those premiums and the final maturity is also tax-free.
  • Partial withdrawal: You can make a partial withdrawal after your account has completed 7 years.

• Children Mutual Funds

  A children's mutual fund is an investment instrument that is designed to generate a healthy corpus for your child’s financial future. This tool directly invests in the market to earn market-generated high returns. The concept behind a Children's Mutual Fund is to start investing early in a child's life, taking advantage of the power of compounding over time.

  Features of Children Mutual Funds

  • Market-linked returns: Children mutual funds allow you to directly step into the market and earn market-linked returns. Although these returns are not guaranteed, a dynamic investment strategy can help you earn high returns.
  • Professional management of funds: Children mutual funds employ professional and experienced investors through asset management companies, which ensure that your capital is professionally managed and earns you high returns.
  • Diversification of portfolio: The fund invests in various asset classes. Investment in these asset classes ensures that your capital remains safe during market fluctuations, as different asset classes behave differently during different market performance. It also lets you earn high rewards during market highs.
  • Flexibility in investment: The guardians of the child have full autonomy over their capital as they can change their investment amount and strategy as per their financial conditions and needs in the future.

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Conclusion

All plans and policies come with benefits and attractive features. The main decision is up to you and your child's needs. It is important to understand all best investment plans carefully before investing your hard-earned money in any kind of plan. You can further read about the best child plans and choose a plan that suits the financial goals of your daughter and your risk tolerance to secure a financially fit future for your child.