Lic Kanyadan Policy vs Sukanya Samriddhi Yojana

As a parent, nothing seems as great as being in a position to provide for your children’s future. If you happen to be the proud parent of a daughter, then the two most common investment options in India would have to be the LIC Kanyadan Policy and the Sukanya Samriddhi Yojana, SSY. While both are oriented at providing the girl child with financial security, there are several differences between them. We compare the two options in this article so that you may make an informed choice for your daughter’s future.

 Basics

LIC Kanyadan Policy:

LIC Product

Insurance-cum-Investment Policy

A Lump Sum payable at Maturity or on Death

Sukanya Samriddhi Yojana:

Government Backed Small Savings Scheme

Part of Campaign “Beti Bachao Beti Padhao”

Savings scheme with high-interest rates only

Eligibility Criteria

LIC Kanyadan Policy must be purchased by Parents/Grand Parents

• Age of the Child: 0 to 13 years on the date of purchasing a policy

 • Maximum age of the policyholder: 60 years

Sukanya Samriddhi Yojana:

• Can be opened in the name of the parents or legal guardians

• Age of the girl child: 0 to 10 years

• Only one account for a girl child with possibility of maximum two accounts for two girl children

Investment and Returns

LIC Kanyadan Policy:

Premium either singly, for limited period or regularly

   Sum assured depends upon plan opted for satisfactorily.

Returns include

Bonuses declared by LIC

 Maturity benefits paid in installments

Sukanya Samriddhi Yojana:

Minimum Annual Deposit ₹250. Maximum Annual Deposit: ₹1,50,000

Interest rate: Announced by the govt from time to time. 7.6% for 2023-24

 Compound interest; compound frequency: yearly

Maturity and Withdrawal

LIC Kanyadan Policy:

 Maturity age: normally when the child reaches 18 years or 20#

 Partial withdrawals are allowed with specific purposes

 Facility of loan is available against the policy

Sukanya Samriddhi Yojana :

• Maturity when the girl attains the age of 21 years

Partial withdrawal for pursuing higher education is allowed after the age of 18 years

Account closure possible after attaining the age of 18 years for marrying the girl off

Tax Benefits

LIC Kanyadan Policy:

Premiums are eligible for deduction against tax payable under Sec 80C

Maturity benefits are taxable under Sec 10 (10D)

Sukanya Samriddhi Yojana:

Contributions, interest earned, and maturity amount are all tax-free under Sec 80C

• The EEE, or Exempt-Exempt-Exempt status

Risk and Security

LIC Kanyadan Policy:

This is a market-linked plan and, therefore it has moderate risks.

Returns would depend on the performance of LIC.

There is life cover for the policyholder.

Sukanya Samriddhi Yojana:

This scheme is backed by the government and hence has low risk.

Returns are guaranteed, and the interest rates get revised every quarter.

There is no life cover under this scheme.

Flexibility and Liquidity

LIC Kanyadan Policy:

This insurance policy has more lenient rules regarding premium payments. There is also a facility of loan against this policy and surrender option, though it may incur losses.

Sukanya Samriddhi Yojana:

• Contributions are fixed without flexibility annually

• Loan facility not available

• Premature closure only in extreme situations is allowed

Purpose and Suitability

LIC Kanyadan Policy:

• You need insurance coverage along with your savings

• If you want an ideal disciplined long term saving plan that comes bundled with life insurance

• If you like a lump sum pay out

Sukanya Samriddhi Yojana:

• Ideal if you are focused purely at saving for a girl child

• If you want guaranteed returns tax-free

• Suitable for conservative investors who give more importance to protection of capital

Pros and Cons: Comparative Analysis

LIC Kanyadan PolicyPros:

1. It is a fine example of an insurance-cum-investment product

2. Flexibility in premium payments

4. Loan facility available

4. More potentially higher returns in rising markets

LIC Kanyadan PolicyCons:

1. Returns not guaranteed

2. Maturity benefits taxable

3. Low liquidity

4. Higher premiums vis-à-vis pure schemes for savings

Pros of Sukanya Samriddhi Yojana:

1. Security with Government backing

2. Attractive and assured rate of interest

3. Complete tax exemption (EEE status)

4. Low minimum deposit requirement

Sukanya Samriddhi Yojana Cons:

1. No insurance cover

2. Maximum two accounts per family

4. Fixed maturity period

3. Withdrawal option is limited

Choosing the Right one

So, here are some points that will help you choose between LIC Kanyadan Policy and Sukanya Samriddhi Yojana:

1. Financial goals: Are you after life insurance or straight-forward savings?

2. Risk appetite: Do you want assured returns, or are you comfortable investing in market-linked plans?

3. Tax implications: Consider overall tax planning strategy

4. Liquidity needs: Check how soon one may need money

5. Daughter’s age: Check age eligibility of both schemes

Needless to say that neither of these options are purely mutually exclusive. Most parents go for both to spread out the investment risk and get full benefits.

Conclusion

Although LIC Kanyadan Policy and Sukanya Samriddhi Yojana are good schemes, few of the benefits make them the best for securing a daughter’s future. Now, while the LIC Kanyadan Policy protects with insurance and investment, it is very apt for anybody who wants complete coverage. The Sukanya Samriddhi Yojana would do well if you want assured returns along with fantastic tax benefits, hence working very well for a conservative saver.

This will finally depend on your personal financial position, goals, and the risk you can take. One is always advised to seek a financial advisor’s counsel in knowing how any of these would fit into an overall financial planning for your daughter’s future.

It simply has to remind one that the prime reason behind success is to invest early, consistently. Be it LIC Kanyadan Policy, Sukanya Samriddhi Yojana, or a mix of both, whatever you decide, your proactive action can do much to secure a bright future for your daughter.