NPS Vatsalya Scheme

The NPS Vatsalya Scheme, launched on September 18, 2024, by Union Finance Minister Nirmala Sitharaman, is an extension of India’s National Pension System (NPS) designed to secure the financial future of minors (children under 18 years). Announced in the Union Budget 2024-25, the scheme allows parents or guardians to open and manage pension accounts for their children, fostering early savings habits and long-term financial planning. Regulated by the Pension Fund Regulatory and Development Authority (PFRDA), NPS Vatsalya operates within the existing NPS framework, transitioning to a standard NPS Tier-I account when the child turns 18.

Key features of the NPS Vatsalya Scheme, as outlined in the Union Budget 2024-25 and official sources, include:

• Early Savings for Minors: Enables parents/guardians to contribute to a pension account for children under 18, building a retirement corpus through compounding.
• Flexible Contributions: Minimum annual contribution of Rs. 1,000 with no upper limit.
• Tax Benefits: Contributions qualify for deductions of up to Rs. 1.5 lakh under Section 80C/80CCD(1) and an additional Rs. 50,000 under Section 80CCD(1B) in the Old Tax Regime.
• Market-Linked Returns: Funds are invested in equities, corporate bonds, and government securities, managed by PFRDA-registered pension funds.
• Simplified Enrollment: Accounts can be opened online via the eNPS portal or through Points of Presence (PoPs) like banks and India Post, using Aadhaar/PAN-based KYC for guardians.

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The NPS Vatsalya Scheme is a pension plan for Indian minors, allowing parents or legal guardians to contribute to a retirement savings account on behalf of their children. Its objectives are to:

• Promote early financial planning for children’s future.
• Encourage financial literacy and savings habits among young individuals.
• Provide market-linked growth for long-term wealth creation.

The scheme is not targeted at specific income groups but is open to all Indian minors, with contributions managed by guardians until the child reaches 18.

The NPS Vatsalya Scheme offers several benefits for families planning their children’s financial future:

• Long-Term Wealth Creation: Market-linked returns (historically 9.5–12.86% for NPS) leverage compounding over decades.
• Tax Benefits: Deductions of up to Rs. 2 lakh (Rs. 1.5 lakh under Section 80C/80CCD(1) + Rs. 50,000 under Section 80CCD(1B)) in the Old Tax Regime.
• Low Entry Barrier: Minimum annual contribution of Rs. 1,000 makes it accessible to most families.
• Flexibility: Contributions and investment choices can be adjusted based on financial goals.
• Regulated and Transparent: Managed by PFRDA with NAV-based tracking for fund safety.

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• Contribution Flexibility: Monthly, quarterly, or annual contributions starting at Rs. 1,000 per year.
• Tax Savings: Up to Rs. 2 lakh in deductions under Section 80C/80CCD(1) and 80CCD(1B) in the Old Tax Regime.
• Partial Withdrawal: Up to 25% of contributions can be withdrawn after 3 years for specific needs (education, medical emergencies, disability), with a maximum of three withdrawals.
• Fund Safety: Regulated by PFRDA, with transparent performance tracking via Net Asset Value (NAV).
• Portability: Accounts remain accessible across India with a unique Permanent Retirement Account Number (PRAN), unaffected by changes in guardian’s job or location.

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Parents or guardians can open an NPS Vatsalya account through:

• eNPS Portal: Register online at enps.nsdl.com, selecting NPS Vatsalya, and complete KYC with an initial contribution of Rs. 1,000.
• Points of Presence (PoPs): Visit banks (e.g., SBI, ICICI, HDFC), India Post, or PFRDA-registered pension funds for offline registration.
• Process: Submit the minor’s date of birth proof and guardian’s KYC documents. A PRAN is issued upon successful registration.

Eligibility Criteria for the NPS Vatsalya Scheme

• Age: Minors under 18 years (Indian citizens, resident or non-resident).
• Guardians: Parents or legal guardians (including NRIs/OCIs contributing via NRE/NRO accounts).
• KYC Compliance: Aadhaar, PAN, or other approved identity/address proof for guardians, plus proof of the minor’s date of birth.

Documents Required for the NPS Vatsalya Scheme

• Minor’s Date of Birth Proof: Birth certificate, passport, school leaving certificate, or PAN.
• Guardian’s KYC: Aadhaar, PAN, passport, voter ID, driving license, or NREGA job card.
• Bank Details: Passbook or cancelled cheque.
• Photograph and Signature: Scanned copies for online applications.

Withdrawal rules align with the standard NPS framework:

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The NPS Vatsalya Scheme, launched in September 2024, is a forward-thinking pension plan that enables parents to build a retirement corpus for their children from an early age. With flexible contributions, tax benefits, and market-linked growth, it promotes financial literacy and long-term security. Regulated by PFRDA, the scheme ensures transparency and portability, making it an accessible option for families across India. For more details or to enroll, visit npstrust.org.in or enps.nsdl.com.

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