Sukanya Yojana Monthly Deposit

An Example of Sukanya Yojana 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
MonthDepositBalanceInterest
Apr2,0002,00014
May2,0004,00029
Jun2,0006,00043
Jul2,0008,00057
Aug2,00010,00072
Sep2,00012,00086
Oct2,00014,000100
Nov2,00016,000115
Dec2,00018,000129
Jan2,00020,000143
Feb2,00022,000158
Mar2,00024,000172
Year End Balance25,1181,118

 

Year 2
MonthDepositBalanceInterest
Apr2,00027,118194
May2,00029,118209
Jun2,00031,118223
Jul2,00033,118237
Aug2,00035,118252
Sep2,00037,118266
Oct2,00039,118280
Nov2,00041,118295
Dec2,00043,118309
Jan2,00045,118323
Feb2,00047,118338
Mar2,00049,118352
Year End Balance52,3963,278

 

Year 3
MonthDepositBalanceInterest
Apr2,00054,396390
May2,00056,396404
Jun2,00058,396419
Jul2,00060,396433
Aug2,00062,396447
Sep2,00064,396462
Oct2,00066,396476
Nov2,00068,396490
Dec2,00070,396505
Jan2,00072,396519
Feb2,00074,396533
Mar2,00076,396548
Year End Balance82,0205,624

 

Year 4
MonthDepositBalanceInterest
Apr2,00084,020602
May2,00086,020616
Jun2,00088,020631
Jul2,00090,020645
Aug2,00092,020659
Sep2,00094,020674
Oct2,00096,020688
Nov2,00098,020702
Dec2,000100,020717
Jan2,000102,020731
Feb2,000104,020745
Mar2,000106,020760
Year End Balance114,1928,172

 

Year 5
MonthDepositBalanceInterest
Apr2,000116,192833
May2,000118,192847
Jun2,000120,192861
Jul2,000122,192876
Aug2,000124,192890
Sep2,000126,192904
Oct2,000128,192919
Nov2,000130,192933
Dec2,000132,192947
Jan2,000134,192962
Feb2,000136,192976
Mar2,000138,192990
Year End Balance149,13010,939

 

Year 6
MonthDepositBalanceInterest
Apr2,000151,1301,083
May2,000153,1301,097
Jun2,000155,1301,112
Jul2,000157,1301,126
Aug2,000159,1301,140
Sep2,000161,1301,155
Oct2,000163,1301,169
Nov2,000165,1301,183
Dec2,000167,1301,198
Jan2,000169,1301,212
Feb2,000171,1301,226
Mar2,000173,1301,241
Year End Balance187,07413,943

 

Year 7
MonthDepositBalanceInterest
Apr2,000189,0741,355
May2,000191,0741,369
Jun2,000193,0741,384
Jul2,000195,0741,398
Aug2,000197,0741,412
Sep2,000199,0741,427
Oct2,000201,0741,441
Nov2,000203,0741,455
Dec2,000205,0741,470
Jan2,000207,0741,484
Feb2,000209,0741,498
Mar2,000211,0741,513
Year End Balance228,28017,206

 

Year 8
MonthDepositBalanceInterest
Apr2,000230,2801,650
May2,000232,2801,665
Jun2,000234,2801,679
Jul2,000236,2801,693
Aug2,000238,2801,708
Sep2,000240,2801,722
Oct2,000242,2801,736
Nov2,000244,2801,751
Dec2,000246,2801,765
Jan2,000248,2801,779
Feb2,000250,2801,794
Mar2,000252,2801,808
Year End Balance273,03020,750

 

Year 9
MonthDepositBalanceInterest
Apr2,000275,0301,971
May2,000277,0301,985
Jun2,000279,0302,000
Jul2,000281,0302,014
Aug2,000283,0302,028
Sep2,000285,0302,043
Oct2,000287,0302,057
Nov2,000289,0302,071
Dec2,000291,0302,086
Jan2,000293,0302,100
Feb2,000295,0302,114
Mar2,000297,0302,129
Year End Balance321,62924,599

 

Year 10
MonthDepositBalanceInterest
Apr2,000323,6292,319
May2,000325,6292,334
Jun2,000327,6292,348
Jul2,000329,6292,362
Aug2,000331,6292,377
Sep2,000333,6292,391
Oct2,000335,6292,405
Nov2,000337,6292,420
Dec2,000339,6292,434
Jan2,000341,6292,448
Feb2,000343,6292,463
Mar2,000345,6292,477
Year End Balance374,40728,778

 

Year 11
MonthDepositBalanceInterest
Apr2,000376,4072,698
May2,000378,4072,712
Jun2,000380,4072,726
Jul2,000382,4072,741
Aug2,000384,4072,755
Sep2,000386,4072,769
Oct2,000388,4072,784
Nov2,000390,4072,798
Dec2,000392,4072,812
Jan2,000394,4072,827
Feb2,000396,4072,841
Mar2,000398,4072,855
Year End Balance431,72433,317

 

Year 12
MonthDepositBalanceInterest
Apr2,000433,7243,108
May2,000435,7243,123
Jun2,000437,7243,137
Jul2,000439,7243,151
Aug2,000441,7243,166
Sep2,000443,7243,180
Oct2,000445,7243,194
Nov2,000447,7243,209
Dec2,000449,7243,223
Jan2,000451,7243,237
Feb2,000453,7243,252
Mar2,000455,7243,266
Year End Balance493,97038,246

 

Year 13
MonthDepositBalanceInterest
Apr2,000495,9703,554
May2,000497,9703,569
Jun2,000499,9703,583
Jul2,000501,9703,597
Aug2,000503,9703,612
Sep2,000505,9703,626
Oct2,000507,9703,640
Nov2,000509,9703,655
Dec2,000511,9703,669
Jan2,000513,9703,683
Feb2,000515,9703,698
Mar2,000517,9703,712
Year End Balance561,56943,599

 

Year 14
MonthDepositBalanceInterest
Apr2,000563,5694,039
May2,000565,5694,053
Jun2,000567,5694,068
Jul2,000569,5694,082
Aug2,000571,5694,096
Sep2,000573,5694,111
Oct2,000575,5694,125
Nov2,000577,5694,139
Dec2,000579,5694,154
Jan2,000581,5694,168
Feb2,000583,5694,182
Mar2,000585,5694,197
Year End Balance634,98249,413

 

Year 15
MonthDepositBalanceInterest
Apr0634,9824,551
May0634,9824,551
Jun0634,9824,551
Jul0634,9824,551
Aug0634,9824,551
Sep0634,9824,551
Oct0634,9824,551
Nov0634,9824,551
Dec0634,9824,551
Jan0634,9824,551
Feb0634,9824,551
Mar0634,9824,551
Year End Balance689,59154,608

 

Year 16
MonthDepositBalanceInterest
Apr0689,5914,942
May0689,5914,942
Jun0689,5914,942
Jul0689,5914,942
Aug0689,5914,942
Sep0689,5914,942
Oct0689,5914,942
Nov0689,5914,942
Dec0689,5914,942
Jan0689,5914,942
Feb0689,5914,942
Mar0689,5914,942
Year End Balance748,89659,305

 

Year 17
MonthDepositBalanceInterest
Apr0748,8965,367
May0748,8965,367
Jun0748,8965,367
Jul0748,8965,367
Aug0748,8965,367
Sep0748,8965,367
Oct0748,8965,367
Nov0748,8965,367
Dec0748,8965,367
Jan0748,8965,367
Feb0748,8965,367
Mar0748,8965,367
Year End Balance813,30164,405

 

Year 18
MonthDepositBalanceInterest
Apr0813,3015,829
May0813,3015,829
Jun0813,3015,829
Jul0813,3015,829
Aug0813,3015,829
Sep0813,3015,829
Oct0813,3015,829
Nov0813,3015,829
Dec0813,3015,829
Jan0813,3015,829
Feb0813,3015,829
Mar0813,3015,829
Year End Balance883,24569,944

 

Year 19
MonthDepositBalanceInterest
Apr0883,2456,330
May0883,2456,330
Jun0883,2456,330
Jul0883,2456,330
Aug0883,2456,330
Sep0883,2456,330
Oct0883,2456,330
Nov0883,2456,330
Dec0883,2456,330
Jan0883,2456,330
Feb0883,2456,330
Mar0883,2456,330
Year End Balance959,20475,959

 

Year 20
MonthDepositBalanceInterest
Apr0959,2046,874
May0959,2046,874
Jun0959,2046,874
Jul0959,2046,874
Aug0959,2046,874
Sep0959,2046,874
Oct0959,2046,874
Nov0959,2046,874
Dec0959,2046,874
Jan0959,2046,874
Feb0959,2046,874
Mar0959,2046,874
Year End Balance1,041,69582,492

 

Year 21
MonthDepositBalanceInterest
Apr01,041,6957,465
May01,041,6957,465
Jun01,041,6957,465
Jul01,041,6957,465
Aug01,041,6957,465
Sep01,041,6957,465
Oct01,041,6957,465
Nov01,041,6957,465
Dec01,041,6957,465
Jan01,041,6957,465
Feb01,041,6957,465
Mar01,041,6957,465
Year End Balance1,131,28189,586

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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