LIC Kanyadaan Policy vs Sukanya Samruddhi Yojana: Which is a better investment for my girl child?

If you are a parent of a girl child in India, you might be wondering how to save and invest for her future needs, such as education, marriage, or any other goal. You might have heard of two popular schemes that claim to offer attractive returns and benefits for the girl child: LIC Kanyadaan Policy and Sukanya Samruddhi Yojana. But which one is better for your daughter? How do they differ in terms of features, benefits, eligibility, tax implications, and risks? In this post, we will compare and contrast these two schemes and help you make an informed decision.

What is LIC Kanyadaan Policy?

LIC Kanyadaan Policy is a modified version of LIC Jeevan Lakshya Plan, which is a participating endowment plan that provides life cover and maturity benefits. The policy is marketed as a scheme that can help parents save for their daughter’s marriage expenses. The policy can be taken by the father or mother of the girl child, who will be the policyholder and the life assured. The policy term can range from 13 to 25 years, depending on the age of the girl child at the time of taking the policy. The minimum sum assured is Rs 1 lakh and there is no maximum limit.

The policy provides the following benefits:

• Death benefit: In case of death of the policyholder during the policy term, the nominee (the girl child) will receive 10% of the sum assured every year till one year before maturity, plus 110% of the sum assured along with accrued bonuses on maturity.
• Maturity benefit: In case of survival of the policyholder till the end of the policy term, he/she will receive the sum assured along with accrued bonuses.
• Premium waiver benefit: In case of death of the policyholder during the policy term, the future premiums will be waived off and the policy will continue till maturity.
• Loan facility: The policyholder can avail a loan against the policy after paying premiums for at least three years.
• Tax benefit: The premiums paid are eligible for deduction under Section 80C and the death or maturity benefits are exempt from tax under Section 10(10D) of the Income Tax Act.

What is Sukanya Samruddhi Yojana?

Sukanya Samruddhi Yojana (SSY) is a government-backed savings scheme that was launched under the Beti Bachao Beti Padhao initiative. The scheme aims to encourage parents to save for their daughter’s education and marriage. The scheme can be opened by the parent or guardian of a girl child who is below 10 years of age. Only one account can be opened per girl child and a maximum of two accounts can be opened per family. The account can be opened at any post office or authorized bank branch with a minimum deposit of Rs 250.

The scheme provides the following benefits:

• Interest rate: The scheme offers a variable interest rate that is notified by the government every quarter. The current interest rate for July-September 2021 is 7.6% per annum, compounded annually.
• Deposit limit: The minimum annual deposit is Rs 250 and the maximum annual deposit is Rs 1.5 lakh. The deposits can be made for up to 15 years from the date of opening the account.
• Withdrawal facility: The account holder (the girl child) can withdraw up to 50% of the balance for her higher education or marriage after attaining 18 years of age or passing 10th standard, whichever is earlier.
• Maturity benefit: The account matures after 21 years from the date of opening or on the marriage of the account holder, whichever is earlier. The account holder will receive the balance along with the interest accrued.
• Tax benefit: The deposits, interest, and maturity amount are exempt from tax under Section 80C, Section 10(10D), and Section 10(11A) of the Income Tax Act, respectively.

LIC Kanyadaan Policy vs Sukanya Samruddhi Yojana: Comparison

Now that we have seen the features and benefits of both the schemes, let us compare them on some key parameters:

Parameter	LIC Kanyadaan Policy	Sukanya Samruddhi Yojana
Eligibility	Father or mother of a girl child aged more than 1 year	Parent or guardian of a girl child aged below 10 years
Account holder	Father or mother	Girl child
Sum assured	Minimum Rs 1 lakh, no maximum limit	Depends on the deposits made
Deposit limit	No limit	Minimum Rs 250, maximum Rs 1.5 lakh per year
Interest rate	Depends on the performance of LIC	Variable, notified by the government every quarter
Payment term	3 years less than the policy term	Up to 15 years from the date of opening the account
Maturity term	13 to 25 years	21 years from the date of opening the account or on marriage, whichever is earlier
Death benefit	10% of sum assured every year till one year before maturity, plus 110% of sum assured and bonuses on maturity	No death benefit
Maturity benefit	Sum assured and bonuses	Balance and interest
Withdrawal facility	Loan facility after 3 years of premium payment	Partial withdrawal after 18 years of age or passing 10th standard, whichever is earlier
Premium waiver benefit	Yes, in case of death of policyholder during policy term	No
Tax benefit	Premiums under Section 80C, death or maturity benefits under Section 10(10D)	Deposits, interest, and maturity amount under Section 80C, Section 10(10D), and Section 10(11A), respectively

Which is a better investment for my girl child?

The answer to this question depends on your financial goals, risk appetite, and preferences. However, here are some points to consider before choosing between LIC Kanyadaan Policy and Sukanya Samruddhi Yojana:

• If you want a guaranteed and fixed income for your daughter’s future needs, you may opt for LIC Kanyadaan Policy. However, you should be aware that the returns may not be very high and may not beat inflation in the long run.
• If you want a higher and variable return for your daughter’s future needs, you may opt for Sukanya Samruddhi Yojana. However, you should be aware that the interest rate may fluctuate depending on the government’s decision and may not be stable in the long run.
• If you want a life cover for yourself along with a savings plan for your daughter, you may opt for LIC Kanyadaan Policy. However, you should be aware that the premium may be higher than other term insurance plans and may reduce your savings potential.
• If you want a pure savings plan for your daughter without any life cover for yourself, you may opt for Sukanya Samruddhi Yojana. However, you should be aware that there is no death benefit in case of your demise and your daughter may not receive any financial support from the scheme.
• If you want more flexibility and control over your deposits and withdrawals, you may opt for Sukanya Samruddhi Yojana. However, you should be aware that there are some restrictions and conditions on the withdrawal facility and the maturity term.
• If you want more certainty and security over your deposits and withdrawals, you may opt for LIC Kanyadaan Policy. However, you should be aware that there is no withdrawal facility before maturity and the policy term is fixed.

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