Investment for Daughter: SIP of ₹5,000 vs. Sukanya Samriddhi Yojana (SSY) – Which Offers Better Returns?

If you are a parent planning to secure your daughter’s future, you might consider two popular investment options: a Systematic Investment Plan (SIP) in mutual funds or the Sukanya Samriddhi Yojana (SSY). Both are viable long-term options, but understanding their features, benefits, and returns can help you make an informed decision.

Key Differences Between SSY and SIP

Advantages of Sukanya Samriddhi Yojana (SSY)

1. Tax Benefits: SSY offers triple tax advantages under the EEE category:
   • The amount deposited is tax-deductible.
   • The interest earned is tax-free.
   • The maturity amount is entirely tax-exempt.
2. Fixed Returns: SSY provides a guaranteed return, currently 8.2% annually.
3. Eligibility: You can only invest if your daughter is below 10 years old.
4. Investment Limit: You can invest up to ₹1.5 lakh annually in SSY.

Disadvantages of SSY

• The investment tenure is rigid: deposits for 15 years with maturity after 21 years.
• Withdrawal is restricted until maturity.

Advantages of SIP

1. Higher Returns Potential: The average return on SIPs is around 12%, with the possibility of even higher returns depending on market performance.
2. Flexibility: SIPs allow you to start, stop, or modify your investments at any time.
3. No Investment Cap: Unlike SSY, there’s no annual limit on how much you can invest.
4. Age Neutral: You can start an SIP in your daughter’s name at any age.

Disadvantages of SIP

• No guaranteed returns, as SIPs are market-linked.
• Tax benefits are limited compared to SSY.

Comparative Returns Analysis: SSY vs. SIP

SSY Returns

• Monthly investment: ₹5,000
• Annual investment: ₹60,000
• Total investment over 15 years: ₹9,00,000

With an interest rate of 8.2%, the total maturity amount after 21 years is ₹27,71,031. This includes ₹18,71,031 as interest.

SIP Returns

• Monthly investment: ₹5,000
• Annual investment: ₹60,000
• Total investment over 15 years: ₹9,00,000

At an average return of 12%, the results are as follows:

• After 15 years: ₹25,22,880 (₹16,22,880 as interest).
• After 21 years: ₹56,93,371 (₹44,33,371 as interest), with a total investment of ₹12,60,000.

Conclusion: Which Is Better?

• Choose SSY if you want guaranteed returns, tax savings, and a secure government-backed scheme. It’s ideal for risk-averse investors looking for steady growth.
• Choose SIP if you are comfortable with market risks and seek higher returns with investment flexibility. Over a 21-year horizon, SIP can potentially offer significantly higher returns compared to SSY.

By aligning your investment goals with the features of these schemes, you can make the best decision to secure your daughter’s future.