If you are saving for a daughter's education or marriage, two options come up again and again: the Sukanya Samriddhi Yojana (SSY), a government small-savings scheme, and an equity mutual fund SIP. One is guaranteed and tax-free; the other can grow more but can also fall. Put ₹1.5 lakh a year into each for 15 years, hold to 21 years, and SSY at 8.2% reaches ₹71.8 lakh while a SIP at 12% reaches about ₹1.05 crore after tax (illustrative assumptions below). This guide sets out the current SSY rules, runs both on the same money, and shows where each one fits. It explains the trade-offs; it does not tell you which to choose.
Sukanya Samriddhi Yojana: The Rules That Matter
- Interest rate: 8.2% a year for October–December 2026. The rate has been 8.2% since 1 January 2024, and the Ministry of Finance kept it unchanged for the October–December 2026 quarter on 30 September 2026. It is reset every quarter, and since the scheme began in December 2014 it has ranged from 7.6% to 9.2%.
- Who can open it: a parent or legal guardian, for a girl child below 10 years of age. One account per girl, and normally up to two girls per family (with an exception for twins or triplets).
- Deposits: at least ₹250 and at most ₹1.5 lakh per financial year. Deposits are made for 15 years from the date of opening. If you miss the minimum, the account goes into default and can be revived with a ₹50 penalty for each year missed.
- Maturity: 21 years from the date of opening, not when your daughter reaches a particular age. Interest keeps compounding for the six years after deposits stop.
- Partial withdrawal: up to 50% of the balance at the end of the previous financial year, for her education, once she turns 18.
- Early closure: for her marriage after she turns 18 (no earlier than one month before and no later than three months after the wedding); on the death of the account holder; or on extreme compassionate grounds such as a life-threatening illness.
A common misunderstanding: opening the account earlier does not give "more years of compounding". Every account runs 21 years from opening. Opening at birth or at age 5 gives the same maturity value for the same deposits; it only changes how old she is at maturity (21 versus 26).
How SSY and Mutual Funds Are Taxed
| SSY | Equity mutual fund | |
|---|---|---|
| Deposit | Deduction up to ₹1.5 lakh under section 123 (old 80C), old regime only | No deduction (except ELSS, under the same section 123 limit, old regime only) |
| Growth | Interest is tax-free | Not taxed until you sell |
| Withdrawal | Tax-free | Held over 12 months: 12.5% on gains above ₹1.25 lakh a year. Held 12 months or less: 20%. Plus 4% cess. |
Under the Income-tax Act, 2025 (from tax year 2026-27), payments from an SSY account are exempt under Schedule II, and equity long-term gains are taxed under section 198. If you are in the new tax regime, SSY gives you no deduction, but its returns are still tax-free. Our guide to mutual fund tax in 2026 covers the fund side in more detail.
Comparison 1: ₹1.5 Lakh a Year for 15 Years, Held to 21 Years
Assumptions (illustrative): SSY at a constant 8.2% with ₹1.5 lakh deposited at the start of each year. The mutual fund gets the same money as ₹12,500 a month at the start of each month, earning 12% a year, then stays invested for six more years so both run 21 years.
| SSY at 8.2% | Equity SIP at 12% | |
|---|---|---|
| Total invested | ₹22.5 lakh | ₹22.5 lakh |
| Value after 15 years | (continues in account) | ₹59.5 lakh |
| Value after 21 years | ₹71.8 lakh | ₹1.17 crore |
| Tax if withdrawn in one year | Nil | About ₹12.2 lakh |
| After tax | ₹71.8 lakh | About ₹1.05 crore |
The SIP tax is (₹1.17 crore − ₹22.5 lakh invested − ₹1.25 lakh exemption) × 12.5% × 1.04. On these assumptions the equity SIP ends up about 1.6 times SSY before tax and about 1.5 times after tax.
Now change the assumptions. If the fund earns 10% instead of 12%, the SIP reaches about ₹88.9 lakh, or about ₹80.5 lakh after tax: still ahead, but only by about ₹9 lakh. If SSY rates fall back to the 7.6% they were in 2020–2023 for the whole period, SSY ends at about ₹65.9 lakh. The equity figure is not guaranteed at all; the SSY figure is guaranteed only at whatever rate is set each quarter.
You can model your own amounts in the SSY calculator.
Comparison 2: College Money at 18, Daughter Aged 5 Today
This is where SSY's structure matters. Suppose your daughter is 5 and you want money for college when she is 18, which is 13 years away. You put ₹1.5 lakh a year into either option.
| At age 18 (13 years) | SSY at 8.2% | Equity SIP at 12% |
|---|---|---|
| Invested so far | ₹19.5 lakh | ₹19.5 lakh |
| Balance | About ₹35.3 lakh | About ₹44.7 lakh |
| How much you can take out | Up to 50% of the previous year's balance, roughly ₹17–18 lakh | All of it (about ₹41.6 lakh after tax) |
The SSY balance is larger than what you can reach. The rest stays in the account: two more deposits are due (15 years from opening ends when she is 20), and the account matures when she is 26. On the same assumptions the remaining half would grow to about ₹38.6 lakh by then. That money is still useful, for a postgraduate course or her marriage, but it is not available for the first year of college.
The equity SIP is fully accessible but exposed to the market in exactly the years you need it. A fall of 30% or more in the final two years is possible, as 2008 and 2020 showed. Many parents start moving SIP money into debt funds or deposits three to five years before the fees fall due. Use the child education cost calculator to estimate what college will cost by then, and our guide to planning for child education costs for how to set the target.
Inflation and Real Return
SSY's 8.2% is a nominal return. Against retail inflation of 4.82% (CPI, August 2026), the real return is about 3.2% a year: (1.082 ÷ 1.0482) − 1. If you plan with 8% education inflation, as FinPlann does because fees tend to rise faster than general prices, the real return falls to barely above zero. That is still positive and tax-free, which few guaranteed options can match.
Where Each One Fits
| Factor | SSY | Equity mutual fund SIP |
|---|---|---|
| Return | 8.2% for October–December 2026, reset quarterly | Market-linked; can be negative over short periods |
| Safety | Government-backed | No guarantee |
| Access | 50% after 18 for education; full at 21 years from opening | Any time (exit loads may apply in the first year) |
| Tax | Tax-free; deduction in old regime only | 12.5% LTCG above ₹1.25 lakh; 20% STCG |
| Flexibility | Fixed deposit period and limits | Change, pause or stop any time |
| Eligibility | Girl below 10 at opening | Anyone |
Many families use both: SSY for a guaranteed, tax-free base that will be there whatever markets do, and an equity SIP for growth on a goal that is more than ten years away. If you are weighing a dedicated children's mutual fund against a plain SIP, see children's fund vs a separate SIP.
Practical Points
- Deposit early in the financial year if you can. Money that goes in late in the year earns interest for fewer months, and our projections above assume deposits at the start of each year.
- Keep the ₹250 minimum going every year so the account does not go into default.
- If you are in the new tax regime, compare SSY with other options on its interest rate and safety alone; there is no deduction.
- Review the SSY rate each quarter. A lower rate in future does not change what your account has already earned, and you can rerun your projection in the SSY calculator at the new rate.
This article compares two savings options for a child's future. It is not investment advice. Mutual fund returns are illustrative assumptions; SSY interest rates are set by the government each quarter.
