Section 80C and Children’s Plans in India: SSY vs Child ULIPs vs PPF
Nov, 16 2025
When you’re planning for your child’s future in India, tax savings aren’t just a bonus-they’re a necessity. With rising education costs, wedding expenses, and the pressure to build a safety net, parents are scrambling to find safe, reliable ways to grow money while cutting their tax bill. Section 80C of the Income Tax Act gives you up to ₹1.5 lakh in deductions every year, and many of the best options for kids fall under it. But not all 80C instruments are made equal. Among the most popular choices are the SSY, Child ULIPs, and PPF. Each has different rules, returns, and risks. Picking the wrong one could cost you years of growth-or worse, leave your child with less than you expected.
What is Section 80C and why does it matter for kids?
Section 80C lets you reduce your taxable income by up to ₹1.5 lakh per year by investing in approved instruments. It’s not a free lunch-you still put in your own money-but the government gives you a tax break in return. For parents, this means every rupee you invest in a qualifying child-focused plan can lower your tax bill by up to ₹46,800 (if you’re in the highest tax bracket). That’s like getting a 31% discount on your savings.
But here’s the catch: not every plan labeled as "for children" qualifies for 80C. Some insurance products promise tax savings but come with hidden fees, low returns, or lock-ins that make them worse than keeping cash under the mattress. You need to know what’s actually worth your money.
SSY: The government-backed safety net for daughters
The Sukanya Samriddhi Yojana (SSY) is a small savings scheme launched in 2015 under the Beti Bachao, Beti Padhao campaign. It’s designed for parents of girl children and offers one of the highest interest rates among all 80C options. As of 2025, the interest rate is 8.2% per annum, compounded annually. That’s significantly higher than PPF’s 7.1% and far above most ULIPs.
You can open an SSY account for a girl child before she turns 10. Only two accounts per family are allowed, one for each daughter. The account stays active for 21 years or until marriage after 18, whichever comes first. You can deposit up to ₹1.5 lakh per year, and the entire amount qualifies for 80C deduction. The interest and maturity amount are completely tax-free.
But SSY has limits. You can’t open it for boys. You can’t withdraw early without serious conditions. And once the girl turns 18, you can withdraw up to 50% for higher education-but only after she’s enrolled. If your daughter doesn’t go to college, you still can’t touch the money until she’s 21. It’s a long-term lock-in, but for families with daughters, it’s hard to beat.
Child ULIPs: High fees, low transparency, risky returns
Child ULIPs (Unit Linked Insurance Plans) are marketed as "all-in-one" solutions: insurance + investment + tax savings. They combine life cover for the parent with a fund that grows based on market performance. On paper, they sound perfect. But in practice, they’re often a trap.
Here’s how they work: you pay a premium, part of it goes to insurance (death benefit), and the rest is invested in equity or debt funds. The insurance component is usually minimal-often just ₹5 lakh coverage for a ₹10,000 monthly premium. That’s not protection; that’s a sales tactic.
Then come the fees. ULIPs charge up to 30% in the first five years for policy administration, fund management, and mortality charges. That means if you invest ₹1 lakh in year one, only ₹70,000 actually gets invested. Over 15 years, that compounds into a massive drag on returns. Studies by SEBI show that after 10 years, most child ULIPs deliver net returns of just 5-6% annually-barely beating inflation.
And the biggest problem? You don’t know where your money is. Unlike PPF or SSY, ULIPs don’t guarantee returns. If the market crashes, your child’s education fund drops. If you stop paying premiums after a few years, you lose most of your money. And if you surrender early, you get back less than half of what you put in.
ULIPs are only worth considering if you’re a high-income earner who already has adequate term insurance and wants market-linked growth. For most parents, they’re a poor substitute for pure investment plans.
PPF: The steady, safe, and simple choice
Public Provident Fund (PPF) has been around since 1968. It’s not flashy. It doesn’t have fancy names or glossy brochures. But it’s the most trusted 80C option for long-term goals like children’s education.
As of 2025, PPF offers 7.1% annual interest, compounded yearly. You can invest up to ₹1.5 lakh per year, and the entire amount qualifies for 80C deduction. The account matures in 15 years, but you can extend it in blocks of five years with or without fresh contributions. You can also take loans after year 3 and partial withdrawals after year 7.
What makes PPF special is its stability. The interest rate is set by the government and rarely drops below 7%. The returns are guaranteed. The corpus is tax-free at maturity. And you can open a PPF account in your child’s name-yes, even if they’re a newborn. The account is managed by the parent until the child turns 18, then the child takes control.
PPF isn’t glamorous, but it’s reliable. If you want your child to have ₹30 lakh by age 20, investing ₹10,000/month in PPF will get you there. No market risk. No hidden fees. No surprises.
Side-by-side comparison: SSY, PPF, Child ULIPs
| Feature | SSY | PPF | Child ULIP |
|---|---|---|---|
| Eligibility | Girl child under 10 | Any child (minor) | Any child (minor) |
| Max annual investment | ₹1.5 lakh | ₹1.5 lakh | Varies (usually ₹1-5 lakh/year) |
| Interest rate (2025) | 8.2% | 7.1% | 5-7% (net after fees) |
| Lock-in period | 21 years or marriage after 18 | 15 years (extendable) | 5-10 years (surrender penalty) |
| Partial withdrawal | After 18 (50% for education) | After 7 years (up to 50%) | Yes, but with penalties |
| Tax on maturity | Completely tax-free | Completely tax-free | Tax-free if held 5+ years |
| Market risk | No | No | Yes |
| Hidden fees | No | No | Yes (up to 30% in first 5 years) |
| Best for | Parents of daughters, long-term safety | Parents wanting steady growth, flexibility | High-income families with existing insurance |
Which one should you pick?
If you have a daughter, start with SSY. It’s the only plan that gives you 8.2% guaranteed returns with zero risk and full tax exemption. It’s purpose-built for girls’ futures. Open it early-before she turns 10-and keep contributing regularly.
If you have a son, or if you want flexibility to use the money for other goals (like a wedding or starting a business), go with PPF. It’s the most balanced option: good returns, low risk, and the ability to withdraw a portion after 7 years. You can even open multiple PPF accounts-for each child, and even one in your own name-to maximize your 80C limit.
Avoid Child ULIPs unless you’re already fully covered by a ₹1 crore term insurance policy and understand how fund charges eat into returns. Most parents who buy ULIPs do it because they’re pressured by agents, not because it makes financial sense. If you want market exposure, invest directly in index funds through SIPs in your own name and use the 80C limit for safer instruments like PPF.
What if you’ve already bought a Child ULIP?
If you’ve already invested in a Child ULIP and it’s been less than 5 years, you’re probably stuck with losses if you surrender. Don’t panic. Here’s what to do:
- Check your policy document for the fund value and charges. Most ULIPs show this in annual statements.
- Compare the current value to what you’ve paid. If you’ve lost 20-40%, you’re not alone.
- Continue paying premiums for at least 5-7 years. The fees drop sharply after year 5.
- Consider switching the fund allocation to debt or balanced options to reduce risk.
- Don’t stop paying. Stopping means you lose everything.
- Once the lock-in ends, evaluate whether to keep it or cash out and reinvest in PPF or mutual funds.
Many parents who held ULIPs for 10+ years ended up with decent returns-but only because they stayed the course. The mistake isn’t buying one-it’s buying it without understanding the cost structure.
Pro tips to maximize 80C for your child
- Use your ₹1.5 lakh limit wisely: split between SSY (for daughters), PPF (for all kids), and maybe a small amount in ELSS if you want equity exposure.
- Start early. A ₹5,000/month investment in SSY for 15 years grows to over ₹18 lakh. Wait until age 5, and it’s only ₹12 lakh.
- Don’t mix insurance with investment. Buy term insurance separately-it’s cheaper and clearer.
- Use automatic transfers. Set up ECS or auto-debit for SSY and PPF so you never miss a payment.
- Keep records. All 80C investments need proof for tax filing. Save bank receipts, passbooks, and statements.
Frequently Asked Questions
Can I open both SSY and PPF for my daughter?
Yes. You can open an SSY account for your daughter and a PPF account in her name too. Both qualify for Section 80C deductions. But remember, the total investment across all 80C instruments (including your own PPF, ELSS, etc.) cannot exceed ₹1.5 lakh per year. So if you invest ₹1 lakh in SSY, you can only put ₹50,000 in her PPF that year.
Is SSY better than PPF for a girl child?
For a girl child, SSY is better than PPF because it offers a higher interest rate (8.2% vs 7.1%) and is specifically designed for her future. The lock-in is longer, but the returns are higher and the tax benefits are identical. If you have both a son and a daughter, use SSY for the daughter and PPF for the son.
Can I withdraw money from PPF before 15 years for my child’s education?
Yes. After the 7th year, you can withdraw up to 50% of the balance at the end of the 4th year. For example, if your child is 12 and needs ₹5 lakh for college, you can withdraw that amount from her PPF account if it’s been open for at least 7 years. You’ll need to submit proof of admission.
Do Child ULIPs offer better returns than mutual funds?
No. After accounting for fees, most child ULIPs deliver net returns of 5-6% annually. A direct equity mutual fund SIP in a low-cost index fund can deliver 10-12% over 15 years. ULIPs are insurance products with investment features-not investment products with insurance. For pure growth, go with mutual funds.
What happens to SSY if my daughter passes away?
If the girl child passes away, the account is closed immediately and the entire balance-principal plus interest-is paid to the guardian or legal heir. There are no penalties or deductions. The government treats this as a compassionate provision.
Can NRIs open SSY or PPF for their children in India?
No. SSY is only available to Indian residents. PPF can be opened only if the parent is an Indian resident at the time of account opening. NRIs cannot open new accounts. If a child becomes an NRI after opening a PPF account, the account can continue until maturity but no further deposits can be made.
Final thoughts: Simplicity wins
The best child investment plan isn’t the one with the fanciest name or the most ads. It’s the one you understand, stick to, and don’t touch until your child needs it. SSY and PPF are simple, safe, and powerful. They don’t promise miracles-they deliver steady, tax-free growth over decades. Child ULIPs promise more but deliver less, often after eating away your savings with fees.
If you’re serious about your child’s future, skip the sales pitches. Open an SSY account if you have a daughter. Open a PPF account for every child. Contribute regularly. Let compounding work. And don’t let anyone convince you that you need insurance to save for education. You don’t. You just need time, discipline, and the right plan.