Finance Minister Nirmala Sitharaman on September 18 rolled out National Pension Scheme (NPS) – Vatsalya, a scheme meant for parents who wish to create a long term corpus for their children.
What is 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. The minimum contribution is Rs 1000 per year and there is no limit on the maximum contribution.
Highlights of the Scheme
| Investment | Parents can invest a minimum of Rs 1000 per month with no upper limit |
| Operation | Parents operate the account until the child turns 18, when the account is transferred to the child’s name |
| Withdrawals | Parents can withdraw up to 25% of the contribution for education, disability or a specified illness, up to 3 times, after a lock-in period of 3 years |
| Account Conversion | When the child turns 18, the account can be converted to a regular NPS account or another Non-NPS scheme |
| Exit | When the child turns 18, the account holder can exit the scheme in these two ways:If the corpus is more than ₹2.5 lakh, 80% of the corpus can be used to buy an annuity and the remaining 20% can be withdrawn as a lump sumIf the corpus is less than or equal to ₹2.5 lakh, the entire corpus can be withdrawn as a lump sum |
| Death | If the account holder dies, the entire corpus is returned to the guardian |
| Regulation | The Pension Fund Regulatory and Development Authority (PFRDA) regulates and administers the NPS Vatsalya Scheme |
| Opening | The quickest way to open an NPS Vatsalya account is through the online platform (eNPS) |
What is the National Pension Scheme?
The National Pension Scheme (NPS) is a pension system open for all citizens of India. The NPS invests the contributions of its subscribers into various market-linked instruments such as equities and debts and the final pension amount on the performance of these investments. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) in India.
In the NPS, individual savings are pooled into a pension fund, which is invested in a diversified portfolio of assets like government bonds, bills, corporate debentures and shares. The returns on these investments contribute to the growth of the NPS account over a period of time.
Aim of the NPS Vatsalya Scheme
Under the NPS Vatsalya Scheme, parents can invest a minimum of Rs 1000 per month with no upper limit, thereby fostering a habit of disciplined savings for their children. The scheme is designed to be operated by parents until the child reaches 18, at which point the account transitions into the child’s name.
Who is eligible for NPS Vatsalya Scheme
NPS Vatsalya is a Contributory Pension Scheme regulated and administered by Pension Fund Regulatory and Development Authority (PFRDA) designed specifically for all India minor citizens till the age of 18 years. The online platform (eNPS) is the quickest way to open an NPS Vatsalya account.
Features & Benefits of NPS Vatsalya Scheme
Some of the features and benefits of NPS Vatsalya Scheme are as follows:
- Parents or Guardians can open an NPS Vatsalya Scheme for their minor children, who will be the sole beneficiaries.
- NPS Vatsalya account will be operated by the guardian for the exclusive benefit of the minor until they attain majority. Once they turn 18 years old, they can continue the account with the accumulated corpus.
- The minimum contribution to NPS Vatsalya is Rs 1000 per annum, and there is no limit on the maximum contribution.
- NPS Vatsalya scheme offers partial withdrawal and exit options.
- The NPS Vatsalya scheme encourages to promote savings habits in children because when the children turn 18, the account can be converted to a standard NPS scheme. Thus, they can manage it and contribute to the account independently.
- This scheme is a good retirement fund option since contributions to the account begin the account holder’s childhood. Thus, a huge amount will be accumulated at the time of child’s retirement. At the time of retirement, one can withdraw 60% of the accumulated amount in the NPS account.
- NPS Vatsalya offers families a systematic approach to ensuring their child’s future financial security.
- The scheme is a valuable tool for securing a child’s financial stability and developing a retirement corpus.
Eligibility Criteria for NPS Vatsalya Scheme
- Both the child and the parent/guardian must be Indian citizens.
- The child must be under 18.
- Parents or Guardians of a child can open and operate the account on behalf of the minors.
- Parents or Guardians will be nominees under the scheme, and the child will be the sole beneficiary.
How to Apply for NPS Vatsalya Scheme
Step 1: Visit the official eNPS Website and submit applications online through the portal.
Step 2: Scroll down and click on the ‘Register Now’ option under the ‘NPS Vatsalya (Minors)’ tab.
Step 3: Enter the guardian’s Date of Birth, PAN number, mobile number and email and click ‘Begin Registration’.
Step 4: Enter the OTP received on the guardian’s mobile number and email.
Step 5: Once the OTP is verified, the acknowledgement number will be generated on the screen. Click on ‘Continue’.
Step 6: Enter the minor’s and guardian’s details, upload the required documents and click ‘Confirm’.
Step 7: Make the initial contribution of Rs 1000.
Step 8: The PRAN will be generated and the NPS Vatsalya account will be opened in the name of the minor.
Also Read Pension Schemes:-
- Unified Pension Scheme (UPS)
- National Pension Scheme (NPS)
- Difference Between Old Pension Scheme (OPS) And New Pension Scheme (NPS)
FAQs
What is the full form NPS?
The full form of NPS is the National or New Pension Scheme.
What is the NPS Vatsalya Scheme?
The NPS Vatsalya Scheme enables parents and guardians to open an NPS account for their minor children and contribute an amount every month or year till the child reaches 18 years. The minimum contribution is Rs 1000 per year and there is no limit on the maximum contribution.
The vatsalya scheme is a variant of the existing NPS, catered towards the young individuals. This scheme allows parents to open accounts for their children and contribute towards their retirement savings.
What are the NPS Vatsalya tax benefits?
The government has not specified the tax aspect of NPS Vatsalya Scheme. They are yet to announce the taxation aspects of this scheme.
Who can open an NPS Vatsalya account?
All parents or guardians of minor children (below 18 years) are eligible to open an NPS Vatsalya Scheme account for their child. This account can even be opened for NRI and OCI children.
How do I check my NPS amount?
Both Employee Provident Fund Organisation (EPFO) and NPS services are readily available on the UMANG platform. You can download the UMANG app and log in. Then, search for NPS and enter your NPS login details for NPS balance check.
What is the Interest Rate for NPS?
The current NPS interest rate ranges between 9% and 12% per annum (as of 2024), making it an appealing long-term investment option for a comfortable retirement.
How is the NPS Vatsalya Scheme beneficial for NRIs?
The NPS Vatsalya Scheme can be beneficial for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) because it allows them build a retirement fund for their children as the scheme helps parents to build a retirement corpus for their children from childhood until they are 18 years old.
