NPS Vatsalya Scheme
“NPS Vatsalya Scheme” was launched by Indian Government under popular ‘NPS’ scheme for giving a long term investment option for parent to secure future of their Minor children. This scheme was launched on September 18, 2024 by the Indian government in Union Budget 24-25.
The main aim of this scheme is to give the parent long term invest option which will secure future of their minor children. Forward thinking parent can ensure the financial security of their children by investing in “NPS Vatsalya Scheme”.
Eligibility and Criteria for Investing
1..Who Can Open the Account?
(i) The account can be opened by parents or legal guardians on behalf of a minor child (below 18 years of age).
(ii) Indian residents and Non-Resident Indians (NRIs) are eligible.
2. What is Minimum Contribution required ?
(i)The initial contribution to open the account is ₹500.
(ii) With Subsequent contributions can be as low as ₹500 per instalment,
3. What is Age Limit ?
(i)The child must be under 18 years at the time of account opening.
(ii) The account get converted into a regular NPS account once the child reaches 18 years of age.
Interest Rates
The returns of ‘NPS Vatsalya Scheme’ is not fix like traditional saving schems. But its return are market-linked and depends on the performance of the pension fund managers (PFMs) chosen for investment.
(i).. Investors has option to allocate funds between equity (E), corporate debt (C), and government bonds (G) based on their risk appetite.
(ii) Historic returns of NPS investments is annually 8 to 10% over the long term.
Key Benefits for Children and Parents
For Children:
(i)..Creates a financial safety for future needs of children like education, Marriage, business needs.
This makes children disciplined investor. Encourage them for long-term savings from childhood. This will provide them financial security.
(ii) For Parents:
Provides a platform for parent to invest for the child’s future systematically.
It is good investment platform for parent to diversifying their investment as per their risk appetite.
(iii) Maturity Benefits:
At the age of 18, it gives excellent maturity benefits to children. The child gets the control of the account, allowing them to use the corpus for personal needs at that time like higher education, entrepreneurship, or other aspirations. Child can further keep this account and continue to invest in it by NPS scheme. The child gets readymade corpus in hand in his NPS account.
Tax Benefits
The NPS Vatsalya Scheme offers tax benefits under the Income Tax Act:
(i)..Section 80CCD(1): Contributions made by the parent/guardian are eligible for a deduction of up to ₹1.5 lakh annually.
(ii) Section 80CCD(1B): An additional deduction of ₹50,000 is available for investments beyond the ₹1.5 lakh limit.
(iii) Exempt-Exempt-Exempt (EEE) Status:
Contributions, returns, and withdrawals at maturity are exempt from tax, provided conditions are met.
Minimum Maturity Period
(i)..The account matures when the minor turns 18 years old.
(ii) It gets transited to a regular NPS account, enabling the young adult to continue investing for their retirement or other goals.
Premature Exits
Main purpose of NPS Vatsalya Scheme is to promote long-term savings so it allows for limited premature withdrawals:
Before Maturity:
(i).. Premature Withdrawals are permitted only in specific situations such as serious illness, education, or unforeseen family crises.
(ii) Withdrawals are limited to 25% of contributions. To execute withdrawals document evidence is required.
Full Exit:
(i).. Full exit is possible only after the minor turns 18 or in cases of exceptional circumstances like the death of the minor or legal guardian.
How to Enroll in the NPS Vatsalya Scheme?
Online Procedure:
(i).. You can visit official NPS website or download mobile app which is available in google play store.
https://npstrust.org.in/open-nps-vatsalya
(ii) Select “NPS Vatsalya” under the account options.
(ii) Complete the KYC process using Aadhaar, PAN, or other valid IDs.
Offline Procedure:
(i)..Visit any NPS Point of Presence (PoP) / Designated bank branch / Post offices
(ii) Fill out the application form and submit the required documents.
Conclusion
1.. NPS Vatsalya Scheme is extension scheme of popular ‘National Pension Scheme’. It provides the option for futuristic parent to give security and stability to their children.
2. It gives the message about financial benefits and importance of long term investment to child.
3. Major benefit of this scheme is that it is directly link to market. It gives flexibility to the investor to invest in equity, debt and govt. bonds depending upon their risk appetite. They have option to choose percentage (%) depending upon their risk appetite.
4. It has TAX benefits also. It gives the strong financial foundation for a child’s future.
5. By starting early and contributing regularly, parents can ensure that their children have access to a substantial financial corpus to meet life’s milestones like higher education, marriage, or a business capital.
6. After becoming Major, Child gets control of his ac. He has option to continue the scheme in NPS account and can continue to contribute. This will give him / her readymade corpus in his NPS pension account.