NPS Vatsalya Scheme

What is the NPS Vatsalya Scheme?

NPS Vatsalya is a scheme for minor children where parents or guardians can contribute to a National Pension Scheme (NPS) account in the name of the child until they reach the maturity age of 18 years. 

The NPS Vatsalya scheme was introduced in Budget 2024 by the Government of India. It allows the NPS Vatsalya Account for children to convert into a standard NPS account, once they reach adulthood. The child can manage their NPS account independently after reaching the maturity age of 18. This scheme helps parents to start saving early for the retirement of their children.

What is NPS?

NPS, or the National Pension System is also widely known as the National Pension Scheme. It is a government-sponsored tax-saving investment scheme that allows you to contribute regularly during your working years to get a pension fund for retirement. 

The accumulated savings are invested in various market-linked financial instruments to generate returns over time.

Upon retirement, you can withdraw a portion of the pension fund in lump sum and the remaining amount to purchase an annuity plan for securing a regular income post-retirement.

NOTE: Union Budget 2024 raised the employer’s NPS contribution limit from 10% to 14% of their salary.

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Features of NPS Vatsalya Scheme

The government is yet to release the full details of the NPS Vatsalya Scheme. However, a few of the known key features of this scheme are as follows: 

• NPS Vatsalya scheme aids in securing children's financial future.

• Funds under NPS Vatsalya accumulate until the child reaches 18 years.

• NPS Vatsalya offers a structured financial planning tool for children's future, mirroring the NPS model for retirement planning.

• Contributions to NPS are invested in market-linked instruments like funds and bonds, offering potential for higher returns than traditional fixed-income options.

Eligibility Criteria for NPS Vatsalya Scheme

You must fulfil the following eligibility conditions before applying for this scheme:

• Both Indian Citizen and Non-Resident Indian (NRI) Parents and Guardians

• OCIs are also eligible

Benefits of NPS Vatsalya Scheme

The following are the key benefits of NPS Vatsalya Scheme: 

• Promotes Saving Habits: NPS Vatsalya encourages the habit of saving from an early age.

• Retirement Planning Benefits: NPS Vatsalya account helps you to build a substantial retirement corpus with early contributions in the NPS account.

• Financial Security and Stability: It ensures long-term financial stability by allowing the conversion of the NPS Vatsalya Account to a standard NPS account on attaining maturity and continuing as a reliable retirement fund.

• Financial Education and Responsibility: NPS Vatsalya helps teach children how to manage their finances responsibly from a young age, promoting savings habits as children mature.

• Systematic Approach to Financial Planning: NPS Vatsalya provides you with a structured method to secure your child’s financial future and build a huge retirement corpus.