Jun 202016
 

An Example of Sukanya Yojana Calculation (Monthly Deposit)

Sukanya Samriddhi Yojana – the flagship program launched by PM Narendra Modi – is one of the most popular government schemes currently running in India. This scheme is particularly designed for female children with absolutely no scope for including any male child from a family.

The scheme offers lucrative interest rates and even better, despite being a small investment scheme, the scheme is linked to market. This means that if market variations lead to increase in interest rates, government will revise the interest rates offered to subscribers of the scheme. On the downside however, if the interest rate falls, there will be a downward revision of interest rates offered by Sukanya Samriddhi Yojana. This revision however takes place quarterly.

The best part of the Yojana is the tax benefits it enjoys. The Sukanya Samriddhi Scheme falls in EEE category. EEE means Exempt-Exempt-Exempt. This simply means that investments (inflow of money) are not taxed, interest earnings (growth) are not taxed and withdrawals (outflow of money) are not taxed either, making the SSY one of the most profitable government-backed small investment schemes available in India.

Anyway, we are not here to discuss about Sukanya Samriddhi Yojana in general. Those details can be found through various online resources. We are here to take a quick look at an example of how Monthly Deposits under this scheme work.

Before we start with an example, we need to clarify one thing. It is very important. You may often read that deposits grow at a compounded rate. This is partially true. This is how it works:

Month on month, the interest is calculated as simple interest. Interest earned is not added to the principle balance in the account. Only at the end of the financial year, the total interest earnings are calculated and added to the account balance. That’s when a compounded calculation is made. However, again from the next month onwards, simple interest calculations begin. This will become clear as we start working with the example.

An example of Sukanya Samriddhi Yojana calculation with monthly deposit

Here in this example we will start with a few assumptions to iron out the complex bumps that can arise during the entire lifetime of an account under Sukanya Samriddhi account. Here are the assumptions:

  • Interest rates offered by the government doesn’t change over time. It remains fixed for the entire year and is determined at the beginning of the financial year and continues till the end of the financial year.
  • No premature withdrawals are made – either for education or for marriage.
  • The account continues to be operational for the full tenure of 21 years.
  • Deposits are made for the maximum allowed period of 14 years.
  • No deposit breaks take place in between and no penalties are paid whatsoever for reactivating the account.
  • Finally, the depositor deposits exactly INR 2000 per month on the first date of each month.

For this example, we will use the current applicable interest rate of 8.6% which is offered by the government. We will assume that the interest rate will not change during the entire tenure of the account.

So, let us begin with the example:

Here,

Monthly investment = INR 2000

Yearly interest = 8.6%

Monthly interest = (8.6 ÷ 12)% = 0.716% = 0.7% (approximation). The monthly interest value is used for interest calculation in the example below.

Year 1
Month Deposit Balance Interest
Apr 2,000 2,000 14
May 2,000 4,000 29
Jun 2,000 6,000 43
Jul 2,000 8,000 57
Aug 2,000 10,000 72
Sep 2,000 12,000 86
Oct 2,000 14,000 100
Nov 2,000 16,000 115
Dec 2,000 18,000 129
Jan 2,000 20,000 143
Feb 2,000 22,000 158
Mar 2,000 24,000 172
Year End Balance 25,118 1,118

 

Year 2
Month Deposit Balance Interest
Apr 2,000 27,118 194
May 2,000 29,118 209
Jun 2,000 31,118 223
Jul 2,000 33,118 237
Aug 2,000 35,118 252
Sep 2,000 37,118 266
Oct 2,000 39,118 280
Nov 2,000 41,118 295
Dec 2,000 43,118 309
Jan 2,000 45,118 323
Feb 2,000 47,118 338
Mar 2,000 49,118 352
Year End Balance 52,396 3,278

 

Year 3
Month Deposit Balance Interest
Apr 2,000 54,396 390
May 2,000 56,396 404
Jun 2,000 58,396 419
Jul 2,000 60,396 433
Aug 2,000 62,396 447
Sep 2,000 64,396 462
Oct 2,000 66,396 476
Nov 2,000 68,396 490
Dec 2,000 70,396 505
Jan 2,000 72,396 519
Feb 2,000 74,396 533
Mar 2,000 76,396 548
Year End Balance 82,020 5,624

 

Year 4
Month Deposit Balance Interest
Apr 2,000 84,020 602
May 2,000 86,020 616
Jun 2,000 88,020 631
Jul 2,000 90,020 645
Aug 2,000 92,020 659
Sep 2,000 94,020 674
Oct 2,000 96,020 688
Nov 2,000 98,020 702
Dec 2,000 100,020 717
Jan 2,000 102,020 731
Feb 2,000 104,020 745
Mar 2,000 106,020 760
Year End Balance 114,192 8,172

 

Year 5
Month Deposit Balance Interest
Apr 2,000 116,192 833
May 2,000 118,192 847
Jun 2,000 120,192 861
Jul 2,000 122,192 876
Aug 2,000 124,192 890
Sep 2,000 126,192 904
Oct 2,000 128,192 919
Nov 2,000 130,192 933
Dec 2,000 132,192 947
Jan 2,000 134,192 962
Feb 2,000 136,192 976
Mar 2,000 138,192 990
Year End Balance 149,130 10,939

 

Year 6
Month Deposit Balance Interest
Apr 2,000 151,130 1,083
May 2,000 153,130 1,097
Jun 2,000 155,130 1,112
Jul 2,000 157,130 1,126
Aug 2,000 159,130 1,140
Sep 2,000 161,130 1,155
Oct 2,000 163,130 1,169
Nov 2,000 165,130 1,183
Dec 2,000 167,130 1,198
Jan 2,000 169,130 1,212
Feb 2,000 171,130 1,226
Mar 2,000 173,130 1,241
Year End Balance 187,074 13,943

 

Year 7
Month Deposit Balance Interest
Apr 2,000 189,074 1,355
May 2,000 191,074 1,369
Jun 2,000 193,074 1,384
Jul 2,000 195,074 1,398
Aug 2,000 197,074 1,412
Sep 2,000 199,074 1,427
Oct 2,000 201,074 1,441
Nov 2,000 203,074 1,455
Dec 2,000 205,074 1,470
Jan 2,000 207,074 1,484
Feb 2,000 209,074 1,498
Mar 2,000 211,074 1,513
Year End Balance 228,280 17,206

 

Year 8
Month Deposit Balance Interest
Apr 2,000 230,280 1,650
May 2,000 232,280 1,665
Jun 2,000 234,280 1,679
Jul 2,000 236,280 1,693
Aug 2,000 238,280 1,708
Sep 2,000 240,280 1,722
Oct 2,000 242,280 1,736
Nov 2,000 244,280 1,751
Dec 2,000 246,280 1,765
Jan 2,000 248,280 1,779
Feb 2,000 250,280 1,794
Mar 2,000 252,280 1,808
Year End Balance 273,030 20,750

 

Year 9
Month Deposit Balance Interest
Apr 2,000 275,030 1,971
May 2,000 277,030 1,985
Jun 2,000 279,030 2,000
Jul 2,000 281,030 2,014
Aug 2,000 283,030 2,028
Sep 2,000 285,030 2,043
Oct 2,000 287,030 2,057
Nov 2,000 289,030 2,071
Dec 2,000 291,030 2,086
Jan 2,000 293,030 2,100
Feb 2,000 295,030 2,114
Mar 2,000 297,030 2,129
Year End Balance 321,629 24,599

 

Year 10
Month Deposit Balance Interest
Apr 2,000 323,629 2,319
May 2,000 325,629 2,334
Jun 2,000 327,629 2,348
Jul 2,000 329,629 2,362
Aug 2,000 331,629 2,377
Sep 2,000 333,629 2,391
Oct 2,000 335,629 2,405
Nov 2,000 337,629 2,420
Dec 2,000 339,629 2,434
Jan 2,000 341,629 2,448
Feb 2,000 343,629 2,463
Mar 2,000 345,629 2,477
Year End Balance 374,407 28,778

 

Year 11
Month Deposit Balance Interest
Apr 2,000 376,407 2,698
May 2,000 378,407 2,712
Jun 2,000 380,407 2,726
Jul 2,000 382,407 2,741
Aug 2,000 384,407 2,755
Sep 2,000 386,407 2,769
Oct 2,000 388,407 2,784
Nov 2,000 390,407 2,798
Dec 2,000 392,407 2,812
Jan 2,000 394,407 2,827
Feb 2,000 396,407 2,841
Mar 2,000 398,407 2,855
Year End Balance 431,724 33,317

 

Year 12
Month Deposit Balance Interest
Apr 2,000 433,724 3,108
May 2,000 435,724 3,123
Jun 2,000 437,724 3,137
Jul 2,000 439,724 3,151
Aug 2,000 441,724 3,166
Sep 2,000 443,724 3,180
Oct 2,000 445,724 3,194
Nov 2,000 447,724 3,209
Dec 2,000 449,724 3,223
Jan 2,000 451,724 3,237
Feb 2,000 453,724 3,252
Mar 2,000 455,724 3,266
Year End Balance 493,970 38,246

 

Year 13
Month Deposit Balance Interest
Apr 2,000 495,970 3,554
May 2,000 497,970 3,569
Jun 2,000 499,970 3,583
Jul 2,000 501,970 3,597
Aug 2,000 503,970 3,612
Sep 2,000 505,970 3,626
Oct 2,000 507,970 3,640
Nov 2,000 509,970 3,655
Dec 2,000 511,970 3,669
Jan 2,000 513,970 3,683
Feb 2,000 515,970 3,698
Mar 2,000 517,970 3,712
Year End Balance 561,569 43,599

 

Year 14
Month Deposit Balance Interest
Apr 2,000 563,569 4,039
May 2,000 565,569 4,053
Jun 2,000 567,569 4,068
Jul 2,000 569,569 4,082
Aug 2,000 571,569 4,096
Sep 2,000 573,569 4,111
Oct 2,000 575,569 4,125
Nov 2,000 577,569 4,139
Dec 2,000 579,569 4,154
Jan 2,000 581,569 4,168
Feb 2,000 583,569 4,182
Mar 2,000 585,569 4,197
Year End Balance 634,982 49,413

 

Year 15
Month Deposit Balance Interest
Apr 0 634,982 4,551
May 0 634,982 4,551
Jun 0 634,982 4,551
Jul 0 634,982 4,551
Aug 0 634,982 4,551
Sep 0 634,982 4,551
Oct 0 634,982 4,551
Nov 0 634,982 4,551
Dec 0 634,982 4,551
Jan 0 634,982 4,551
Feb 0 634,982 4,551
Mar 0 634,982 4,551
Year End Balance 689,591 54,608

 

Year 16
Month Deposit Balance Interest
Apr 0 689,591 4,942
May 0 689,591 4,942
Jun 0 689,591 4,942
Jul 0 689,591 4,942
Aug 0 689,591 4,942
Sep 0 689,591 4,942
Oct 0 689,591 4,942
Nov 0 689,591 4,942
Dec 0 689,591 4,942
Jan 0 689,591 4,942
Feb 0 689,591 4,942
Mar 0 689,591 4,942
Year End Balance 748,896 59,305

 

Year 17
Month Deposit Balance Interest
Apr 0 748,896 5,367
May 0 748,896 5,367
Jun 0 748,896 5,367
Jul 0 748,896 5,367
Aug 0 748,896 5,367
Sep 0 748,896 5,367
Oct 0 748,896 5,367
Nov 0 748,896 5,367
Dec 0 748,896 5,367
Jan 0 748,896 5,367
Feb 0 748,896 5,367
Mar 0 748,896 5,367
Year End Balance 813,301 64,405

 

Year 18
Month Deposit Balance Interest
Apr 0 813,301 5,829
May 0 813,301 5,829
Jun 0 813,301 5,829
Jul 0 813,301 5,829
Aug 0 813,301 5,829
Sep 0 813,301 5,829
Oct 0 813,301 5,829
Nov 0 813,301 5,829
Dec 0 813,301 5,829
Jan 0 813,301 5,829
Feb 0 813,301 5,829
Mar 0 813,301 5,829
Year End Balance 883,245 69,944

 

Year 19
Month Deposit Balance Interest
Apr 0 883,245 6,330
May 0 883,245 6,330
Jun 0 883,245 6,330
Jul 0 883,245 6,330
Aug 0 883,245 6,330
Sep 0 883,245 6,330
Oct 0 883,245 6,330
Nov 0 883,245 6,330
Dec 0 883,245 6,330
Jan 0 883,245 6,330
Feb 0 883,245 6,330
Mar 0 883,245 6,330
Year End Balance 959,204 75,959

 

Year 20
Month Deposit Balance Interest
Apr 0 959,204 6,874
May 0 959,204 6,874
Jun 0 959,204 6,874
Jul 0 959,204 6,874
Aug 0 959,204 6,874
Sep 0 959,204 6,874
Oct 0 959,204 6,874
Nov 0 959,204 6,874
Dec 0 959,204 6,874
Jan 0 959,204 6,874
Feb 0 959,204 6,874
Mar 0 959,204 6,874
Year End Balance 1,041,695 82,492

 

Year 21
Month Deposit Balance Interest
Apr 0 1,041,695 7,465
May 0 1,041,695 7,465
Jun 0 1,041,695 7,465
Jul 0 1,041,695 7,465
Aug 0 1,041,695 7,465
Sep 0 1,041,695 7,465
Oct 0 1,041,695 7,465
Nov 0 1,041,695 7,465
Dec 0 1,041,695 7,465
Jan 0 1,041,695 7,465
Feb 0 1,041,695 7,465
Mar 0 1,041,695 7,465
Year End Balance 1,131,281 89,586

If you notice carefully, at the beginning of the second year, the total interest earning gets added to the account balance and then new investment is added to the total balance. Only after that, the interest is calculated. This means that compounded growth takes place only once every year and then the system reverts back to basic simple interest calculation.

Also, you will notice that at the end of 14th year, that is starting from 15th year, no fresh investments are allowed. This means that the maximum number of investment years – 14 years – is fulfilled. The account then continues to earn interest without any further addition in total balance in form of incoming investment. The account balance grows only once a year when at the end of each year, the total interest earnings are added to the account balance.

So basically the total investment in 14 years is: 14 x 12 x 2000 = INR 3,36,000 but when the account finally matures at the end of 21 years, the amount grows to INR 1,131,281. This is more than 3 times the actual invested money.

This is how monthly investments work in Sukanya Samriddhi Yojana. However, every quarter the interest rate will change in actual scenario. So, the final maturity amount can be different from what is shown in this example.

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