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Best Investment Plan for Girl Child in India

Investing in a girl child's future is vital for her financial independence. India offers diverse options, including government schemes like Sukanya Samriddhi Yojana and Balika Samridhi Yojana, as well as ULIPs, FDs, and mutual funds. These provide various avenues to meet her financial needs and aspirations. ...Read More

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Best Investment Plan for Girl Child in India

11 Best Investment Plan for Your Girl Child

Best Investment Plans for Girl Child
July 26, 2024

Table of Content

 

Investing in the future of a girl child is crucial to ensuring her financial security and well-being. In India, securing a daughter's financial future is a priority for many families. Choosing the best investment plan for the girl child in India requires careful consideration of factors like investment horizon, risk tolerance, and financial goals. 

This article explores 11 top investment options, including a detailed analysis of their features and benefits. Moreover, we will compare the benefits of child plans with the Sukanya Samriddhi Yojana (SSY) and Public Provident Fund (PPF). By the end of this article, you will have a comprehensive understanding of the best investment plan for a girl child in India.

11 Best Investment Options Available for the Girl Child

Planning your daughter's future financially can be a fulfilling endeavour. In this section, we will explore a variety of investment options designed to cultivate a secure and prosperous path for her, ensuring she has the resources to achieve her dreams.

1. Sukanya Samriddhi Yojana Scheme:

The Sukanya Samriddhi Yojana (SSY) is a savings scheme for the benefit of the girl child, sponsored by the government. It comes with an appealing interest rate and provides tax benefits. The scheme encourages parents to invest in their daughter's future by providing financial security and stability. SSY has a lock-in period, and the maturity proceeds can be used for various purposes such as education, marriage, and career development.

The Sukanya Samriddhi Yojana (SSY) offers a secure and beneficial savings scheme to empower girl children. The key features are:

  • Eligibility: An account can be opened for a girl child up to 10 years old.
  • Investment: Minimum Rs. 250, maximum Rs. 1.50 lakh annually.
  • Flexible deposits: Contribute throughout the 15-year tenure or at your convenience.
  • High interest rates: Currently enjoys attractive interest rates of 8.2% per annum.
  • Tax benefits: Deposits qualify for deduction under Section 80C1, and both interest and maturity amounts are tax-free.
  • Long-term security: Account matures in 21 years or upon marriage after 18 years.
  • Early partial withdrawal: Access 50% of funds for higher education after 18 years.
  • Nationwide portability: Transfer the account easily across banks or post offices in India.

2. Unit-Linked Insurance Plan (ULIP):

In this policy, the investment risk in investment portfolio is borne by the policyholder.

ULIPs offer a combination of investment and insurance. They allow policyholders to invest in diverse asset classes while providing a life cover. ULIPs provide flexibility in choosing the investment portfolio and allow partial withdrawals, making them suitable for long-term financial goals. The key features of ULIPs are listed below:

  • Dual Benefit: ULIPs provide both life insurance protections for your beneficiaries in case of unfortunate events and the opportunity to grow your wealth through market-linked investments.
  • Investment Flexibility: ULIPs allow you to choose from various investment fund options based on your risk appetite, enabling you to tailor the investment strategy to your financial goals.
  • Potential for Market-Linked Returns: Unlike traditional insurance plans, ULIPs invest a portion of your premium in the stock market, offering the potential for higher returns compared to fixed-interest products.
  • Tax Benefits: Premiums paid towards ULIPs can be partially tax-deductible under Section 80C of the Income Tax Act1, and maturity benefits may be tax-free under Section 10(10D).
  • Transparency: ULIPs offer transparency in charges and investment performance, allowing you to track your plan's progress.
  • Flexibility in Premium Payments: ULIPs provide flexibility in premium payment options, allowing you to choose from regular, single, or top-up premiums to suit your financial situation.
  • Riders for Additional Coverage: You can often enhance your ULIP with optional riders for critical illness protection, accidental death benefit, or waiver of premium payments in case of disability.

3. Post-Office Term Deposit (POTD):

Post-Office Term Deposits are a safe and secure investment option. They offer fixed interest rates and are available with various tenures. POTDs can be opened in the name of a girl child, and the returns can be used to fund her education or other financial needs. Post Office Term Deposit (POTD) offers a secure and convenient saving option with several attractive features:

  • Multiple Deposit Tenures: Choose a lock-in period of 1, 2, 3, or 5 years to suit your investment goal.
  • Low Minimum Deposit: Start your investment journey with a minimum deposit of Rs. 1,000.
  • Guaranteed Returns: Earn assured interest rates on your deposited amount.
  • Tax Benefits: Five-year POTDs qualify for tax deductions under Section 80C of the Income Tax Act1.
  • Joint Account Option: Open a POTD account jointly with another person.
  • Easy Transfers: Transfer your POTD account between post offices for added convenience.
  • Nomination Facility: Nominate a beneficiary to receive the deposited amount upon your demise.
  • Government Backing: Benefit from the safety and security of an investment backed by the Government of India.

4. National Savings Certificate (NSC):

National Savings Certificate (NSC) is a government-backed savings scheme in India offering a combination of security, guaranteed returns, and tax benefits1. They offer a fixed interest rate and have a lock-in period. NSCs can be an excellent long-term investment option for a girl child as they provide assured returns and tax benefits. The key features of National Savings Certificate (NSC) are as follows:

  • Fixed Interest Rate: NSC offers a fixed interest rate set by the government, ensuring predictable returns on your investment. Currently, the National Savings Certificate provides an interest rate of 7.70%.
  • Guaranteed Maturity Period: The scheme comes with a fixed maturity period, usually 5 years, encouraging long-term saving habits.
  • Tax Benefits: Investments in NSC qualify for tax deductions under Section 80C of the Income Tax Act1, up to a specified limit.
  • Safe and Secure: Backed by the Government of India, NSC provides a high degree of security for your principal investment.
  • Accessible Investment: You can invest in NSCs with a minimum amount of Rs. 1000 in multiples of Rs. 100 at any post office branch.
  • Regular Interest Compounding: Interest earned on NSC is compounded annually, leading to faster growth of your investment.

These features make NSC a suitable investment option for risk-averse individuals seeking guaranteed returns and tax savings.

5. CBSE Udaan Scheme:

CBSE Udaan Scheme aims to provide financial assistance to meritorious female students to help them pursue their education. The scheme provides scholarships and covers expenses related to coaching, study material, and guidance. Investing in your daughter's education through the CBSE Udaan Scheme can unlock a brighter future for her. Key Features of the CBSE Udaan Scheme are:

  • Free Learning Resources: The scheme provides female students in Classes XI and XII with free access to online and offline study materials, including video tutorials and preloaded tablets.
  • Virtual Contact Classes: Udaan conducts virtual weekend contact classes in 60 designated city centres across India, facilitated by experienced faculty.
  • Focus on Entrance Exams: The program specifically targets engineering entrance exams, preparing students for admission to prestigious Indian engineering colleges.
  • Merit-based Selection: Selection for Udaan is based on merit and student preference for the city offering virtual classes.
  • Comprehensive Support System: The program offers ongoing student progress monitoring, feedback mechanisms, and even motivational sessions to encourage participants.

6. National Scheme of Incentive for the Girls of Secondary Education:

The National Scheme of Incentives for the Girls of Secondary Education focuses on promoting girls' education. Under this scheme, a scholarship is provided to encourage girls to continue their studies after secondary education. This investment in education can empower the girl child and enhance her future prospects. Designed to promote girls' education, the National Scheme of Incentive for the Girls of Secondary Education (NSIGSE) offers several key benefits:

  • Financial Incentive: A one-time deposit of Rs. 3,000 is made in the beneficiary's name upon successful enrollment in Class 9.
  • Term Deposit: The deposited amount grows with interest until the girl reaches 18 years of age.
  • Eligibility: All girls who clear Class 8 and are enrolled in Class 9, specifically those belonging to Scheduled Caste (SC) and Scheduled Tribe (ST) communities, are eligible.
  • No Income Limit: There is no minimum income requirement for girls to qualify for the NSIGSE scheme.

7. Balika Samridhi Yojana:

Balika Samridhi Yojana is a centrally-sponsored scheme that aims to address the issue of gender disparity. It provides financial support to families having girl children below the poverty line. The scheme focuses on the holistic development of the girl child, including health, education, and overall well-being. The Balika Samridhi Yojana offers several key features:

  • Financial Assistance: Provides financial aid to families for girl child education, covering expenses like tuition fees and books.
  • Improved School Enrollment: Encourages increased enrollment and retention of girls in schools by offering financial support.
  • Discourages Child Marriage: By promoting education, the scheme aims to delay marriage and empower girls to make informed life choices.
  • Long-Term Benefit: Provides a long-term financial benefit for the girl child, promoting her future independence.
  • Easy Accessibility: Targets families from economically weaker sections with a focus on inclusivity.

8. Post-Office Recurring Deposit:

Post-Office Recurring Deposit is a systematic savings scheme that allows individuals to invest a fixed amount every month for a predetermined period. This investment option can instil financial discipline and help accumulate a significant corpus for the girl child's future needs. Post Office Recurring Deposit (RD) offers a safe and secure savings option with several beneficial features:

  • Minimum Investment: Start small with a minimum monthly deposit of just Rs. 100.
  • Flexible Deposits: Increase deposits in multiples of Rs. 10 to suit your savings goals.
  • Long-Term Savings: Cultivate a savings habit with a fixed tenure of 5 years.
  • Regular Deposits: Ensure disciplined saving through monthly instalments.
  • Compound Interest: Earn interest on your principal amount and accumulated interest for maximum returns. Interest is compounded quarterly.
  • Loan Facility: Avail a loan against your deposit after a certain period, subject to conditions.
  • Nomination Facility: Appoint a nominee to ensure your deposit reaches your loved ones in case of your unfortunate demise.
  • Government Guaranteed: Benefit from the security of a government-backed scheme.

9. Fixed deposit (FD):

Fixed Deposits are a popular investment option among Indian investors. They offer a fixed interest rate and various tenure options. Opening a fixed deposit account in the name of the girl child ensures stability and guaranteed returns at maturity. FDs are a popular investment choice for individuals seeking a safe and predictable return on their money.

Some of the key features of fixed deposits are:

  • Guaranteed Returns: Unlike market-linked investments, FDs offer a fixed interest rate for the chosen tenure, ensuring a predetermined return on your investment.
  • Minimal Risk: Fixed deposits are considered low-risk investments as they are typically backed by the bank's creditworthiness.
  • Flexible Tenure: You can choose a deposit period ranging from a few days to several years, allowing you to tailor the investment to your financial goals.
  • Interest Payout Options: Select how you receive interest - regular payouts or compounded interest at maturity to maximise your returns.
  • Loan against Deposit: Many banks offer loans against your FD, providing access to liquidity without prematurely withdrawing the deposit.
  • Tax Benefits: Senior citizens may receive slightly higher interest rates, and tax-saving FDs offer tax benefits under specific sections of the Income Tax Act1.

10. Public Provident Fund (PPF):

Public Provident Fund is a long-term investment option that offers tax benefits1 along with wealth accumulation. PPF accounts can be opened in the name of a girl child, and the annual contributions made towards the account can help build a substantial corpus for her future needs. The Public Provident Fund (PPF) is intended to encourage long-term savings and secure investments. Its key features are:

  • Guaranteed Returns: PPF offers attractive interest rates set by the government every quarter.
  • Tax Benefits: Investments up to Rs. 1.50 lakh qualify for tax deduction under Section 80C1. Interest earned and maturity amount are also tax-free.
  • Long-Term Investment: PPF has a lock-in period of 15 years, promoting long-term financial goals.
  • Minimum and Maximum Investment: You can invest a minimum of Rs. 500 and a maximum of Rs. 1.50 lakh annually.
  • Loan Facility: After 3 years, a loan facility is available against your PPF account.
  • Partial Withdrawals: Partial withdrawals are allowed after the 7th year, subject to conditions.
  • Account Extension: After 15 years, the account can be extended in blocks of 5 years.
  • Safe and Secure: Backed by the Government of India, PPF ensures high security for your investment.

11. Children Gift Mutual Fund:

Children's Gift Mutual Funds are designed specifically for investing on behalf of a child. These funds invest in a diversified portfolio, ensuring optimal returns over the long term. Investing in a Children's Gift Mutual Fund can help the girl child inculcate a habit of regular savings and wealth creation. Children's Gift Mutual Funds are investment options specifically tailored to meet your child's long-term financial goals, such as education or marriage. Some of the key features to consider are:

  • Long-term Investment Horizon: Typically enforced by a lock-in period of 5 years or until your child reaches adulthood, these funds encourage a disciplined approach to future needs.
  • Balanced Portfolio: They often invest in a mix of equity and debt instruments, aiming to achieve a balance between growth potential and risk mitigation.
  • Tax Benefits: Investments in Children's Gift Funds may qualify for tax deductions under Section 80C of the Income Tax Act1.
  • Potential for Growth: By leveraging the power of compounding over an extended period, these funds have the potential to generate significant returns for your child's future.
  • Flexibility in Investment: Some plans offer the option to choose a customisable lock-in period or make regular contributions through Systematic Investment Plans (SIPs).

Child Plan vs Sukanya Samriddhi Yojana and PPF

While child plans  offer a combination of insurance and investment, Sukanya Samriddhi Yojana and Public Provident Fund are dedicated investment options for a girl child's future. Child plans provide risk coverage in case of the policyholder's demise, ensuring financial security for the child.

On the other hand, Sukanya Samriddhi Yojana and the Public Provident Fund offer tax benefits and better interest rates. It is advisable to consider individual financial goals and risk appetite while selecting the most suitable investment option for a girl child.

Choosing the right investment plan for your girl child's future can be overwhelming. The comparison of three popular options: Child Plans, Sukanya Samriddhi Scheme (SSY), and Public Provident Fund (PPF) is illustrated below to help you decide:

Features

Child Plan

Sukanya Samriddhi Scheme (SSY)

Public Provident Fund (PPF)

Investment Type

Market-linked insurance plan

Government savings scheme

Government savings scheme

Who can Invest?

Parent/Guardian

Parent/Guardian of girl child (up to 10 years old)

Anyone (for self or minor)

Investment Period

Policy term chosen (typically 18-25 years)

Up to 21 years (extendable till marriage after 18)

15 years (extendable in blocks of 5 years)

Minimum Investment

Plan specific (usually Rs. 500-1000 per month)

Rs. 250 per year

Rs. 500 per year

Maximum Investment

Plan specific (usually high limits)

Rs. 1.50 lakh per year

Rs. 1.50 lakh per year

Returns

Market-linked (potential for high returns but also risk)

Fixed interest rate (currently 8.20%)

Fixed interest rate (currently 7.10%c)

Tax Benefits

Premiums qualify for tax deduction (u/s 80C)1. Maturity benefits may be taxable.

Tax-exempt on investment, interest, and maturity amount.

Tax-exempt on investment, interest earned (up to Rs. 1.50 lakh/year), and maturity amount.

Liquidity

Limited withdrawal options during the policy term. Surrender charges may apply.

Partial withdrawal is allowed after 18 years if the daughter gets married.

Partial withdrawal is allowed after 6th year (restricted amount).

Suitability

For high-risk appetite and long-term goals (education, marriage)

Specifically designed for girl child's future needs

Good for guaranteed returns and long-term wealth creation

Conclusion

Investing in the future of a girl child is a crucial step towards ensuring her financial independence and empowerment. The aforementioned investment options provide diverse avenues to meet the financial needs and aspirations of a girl child in India. From government-backed schemes like Sukanya Samriddhi Yojana and Balika Samridhi Yojana to investment avenues like ULIPs, FDs, and mutual funds, there is a plethora of choices available to choose the best investment plan for girl child in India. 

Regardless of the plan you select, starting early and investing consistently is key to securing your daughter's financial future. A well-planned investment strategy can empower your daughter to achieve her aspirations and thrive independently.

FAQs on Best Investment Plan for Girl Child in India

Which investment is best for a girl child?

The best investment options for a girl child in India include the Sukanya Samriddhi Yojana, Public Provident Fund, Unit-Linked Insurance Plan, and Children Gift Mutual Funds. These investment options offer attractive returns, tax benefits1, and the potential for wealth creation.

Which scheme is best for a girl child in India?

Sukanya Samriddhi Yojana is considered the best scheme for a girl child in India. It offers an excellent interest rate, tax benefits1, and withdrawal flexibility. The scheme focuses solely on the girl child's financial security and offers a safe and secure investment avenue.

What is the tax benefit of Sukanya Samriddhi Yojana(SSY)?

Sukanya Samriddhi Yojana offers tax benefits under Section 80C of the Income Tax Act1. The contributions made towards the scheme are eligible for a deduction up to Rs. 1.50 lakh, making it an attractive investment option for parents.

Which is the best child plan to invest under Rs. 500?

Investing in a child plan under Rs. 500 can provide long-term financial benefits. Unit-Linked Insurance Plans (ULIPs) and systematic investment plans (SIPs) in Children's Gift Mutual Funds are popular child plans that can be considered for investment within this budget.

Is Sukanya Samriddhi Yojana better than a mutual fund?

Sukanya Samriddhi Yojana offers several advantages, including guaranteed returns, tax benefits1, and a dedicated investment avenue for a girl child. On the other hand, mutual funds offer the potential for higher returns but are subject to market risks. The choice between the two depends on the individual's risk appetite and financial goals.

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Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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1. Tax Laws are subject to change from time to time. Tax benefits are subject to conditions under Sections 80C, 80D, Section 10(10D) and other provisions of the Income Tax Act, 1961.

NOTE: This article is for information purpose only and not intended to provide any investment, legal, tax or accounting advice. The recipient(s) should rely solely upon their own independent judgments, assumptions, experience and knowledge with respect to any particular decision.

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