Sukanya Samriddhi vs FD: What are the Difference

A good savings plan balances returns, safety, liquidity and flexibility and that’s why many people compare Sukanya Samriddhi Yojana (SSY) with a traditional bank/ post‑office Fixed Deposit (FD). While both are low-risk and familiar to Indian investors, they serve different purposes and suit different needs.

Open Demat account -  Begin your investment journey now!

What is Sukanya Samriddhi (SSY) and What is an FD

• Sukanya Samriddhi Yojana (SSY): A government‑backed small‑savings scheme introduced under the “Beti Bachao, Beti Padhao” initiative, aimed at encouraging long-term savings for the girl child. Account is opened in the girl child’s name by parents or guardian, to protect her future education or marriage expenses.
• Fixed Deposit (FD): A term deposit offered by banks or post‑offices, where you deposit a lump sum for a fixed tenure and get a predetermined interest rate. It’s a simple and widely-used instrument for secure, fixed returns.

Both are considered safe and conservative but their features diverge significantly, especially in terms of purpose, restrictions and returns.

Key Differences Between SSY and FD

Parameter

Sukanya Samriddhi Yojana (SSY)

Fixed Deposit (FD)

Interest Rate

8.2% per annum (as of Oct–Dec 2025 quarter) interest rate fixed by government quarterly.

FD rates vary by bank / tenure; typical range ~ 6.5–7.5 % (longer tenure), but may be lower recently.

Who can open

Only for a girl child; opened by parent/guardian when the child is below 10 years. Only one account per child (maximum two per family for twins/triplets) allowed.

Any adult or guardian; open for self, or on behalf of minor; no restriction on number (subject to bank policy).

Minimum & Maximum Investment

Min deposit ₹ 250 per financial year; total deposit cap ₹ 1.5 lakh per year.

Minimum varies bank‑to‑bank; no strict upper cap (subject to deposit insurance limits)

Tenure / Lock-in

Long‑term: matures 21 years from opening or when girl marries after reaching age 18 (whichever first). Deposits allowed only for first 15 years. Premature withdrawal restricted; allowed under special conditions (e.g. education, marriage after child turns 18).

Flexible: FD terms can range from short (days) to medium/long (1–10+ years), based on bank scheme. Premature withdrawal generally allowed (with penalty or rate adjustment).

Tax Benefits

Deposits up to ₹ 1.5 lakh under Sec 80C; interest and maturity amount fully tax-free (EEE: exempt–exempt–exempt).

Standard FDs: Interest is taxable, subject to TDS if interest exceeds slab or threshold; only “Tax‑saving FDs” (5‑year lock-in) offer 80C benefit but interest is still taxable on maturity.

Liquidity / Flexibility

Low: Withdrawals only under strict conditions (education/marriage after daughter turns 18), or account maturity. No loan against SSY.

High: Can choose tenure; early withdrawals allowed (with penalty or reduced interest); loans sometimes allowed on FD (banks permit loan against FD)

Purpose / Best For

Long‑term savings for girl child education, marriage, long‑term security. Good for disciplined, long‑term goals.

Short / medium‑term needs, flexibility, liquidity, deposit for emergencies. Good for fixed‑income parking or short‑term goals.

Why SSY Often Gives Better Returns than Typical FD

• SSY’s interest rate of 8.2% p.a. (as of late 2025) is often higher than what many regular bank FDs offer.
• Interest in SSY is compounded annually and credited at end of financial year helping compounding effect over long 20+ years.
• The scheme is sovereign‑backed (Government of India guarantee), offering safety and stability without the credit risk banks carry especially relevant if FD is with a small bank or institution.

Hence, for long-term goals especially for a child’s future SSY tends to outperform many conventional FDs (after accounting for interest, tax, inflation).

Where FD Wins Over SSY: Flexibility & Liquidity

Despite SSY’s higher return, FD has its own advantages:

• Liquidity & Flexibility: FDs can be matched to your cash flow needs whether short‑term (few months) or medium‑term (3–5 years). You can split deposits, ladder FDs, and withdraw when needed. SSY locks money for decades.
• No Restriction on Beneficiary: FD isn’t restricted to a girl child; anyone can invest (adult, senior citizen, even minor via guardian), and you can open multiple FDs.
• Shorter Tenures Possible: If you have short-term financial goals (child’s education after 3–5 years, down payment for home, etc.), FD makes more sense than waiting 15–20 years for SSY maturity.
• No Limit on Investable Amount: If you have lump sums larger than ₹1.5 lakh per year, FD allows investing more (though deposit insurance limits need consideration).

Suited Goals: When to Prefer SSY vs When to Prefer FD

Choose SSY if:

• You’re investing for your girl child’s long‑term future (education, marriage, long‑term security).
• You value stability, tax‑free growth, and are comfortable locking money for long term (15–21 years).
• You want government‑backed safety and are okay with limited flexibility in withdrawal.
• You want to benefit from tax deduction under 80C plus tax‑free interest/maturity.

Choose FD if:

• You need funding for short‑term or medium term goals (3–5 years).
• You value liquidity and may need to withdraw funds before long term.
• You don’t fit SSY’s eligibility criteria (e.g. no girl child, or deposit amount more than 1.5 lakh/year).
• You want flexibility multiple deposits, staggered tenures, potential loan against deposit, etc.

What Happens if Mix Both? Balanced Approach

Many financial advisors suggest a hybrid strategy: use SSY to build a long‑term corpus for child’s future, and use FDs to park short‑medium‑term savings or emergency corpus.

This way:

• You get tax-free long-term growth via SSY.
• You retain flexibility and liquidity via FDs for nearer goals or emergencies.
• You spread risk and avoid tying up all funds for decades.

Indeed, combining both long‑term safety + medium‑term liquidity often gives the best of both worlds.

Limitations & What to Watch Out

• SSY: Lock‑in till 21 years / marriage; limited withdrawal flexibility; deposit cap ₹1.5 lakh/year; only for girl child, so investment horizon and purpose must align.
• FD: Interest rates fluctuate; real returns may get eroded by inflation; interest is taxable so effective return may be lower; high‑value deposit carries bank risk (especially if too much in one bank) and limited deposit insurance (₹ 5 lakh from DICGC).

When investing especially in FDs it's wise to diversify across multiple banks to reduce risk, and consider inflation & tax impact on real returns.