NPS Vatsalya Scheme 2026: Eligibility, Tax Benefits, Interest Rate & Account Opening

The NPS Vatsalya Scheme is a government-backed pension scheme for minor children under the National Pension System (NPS). Parents or legal guardians can open and operate the account on behalf of a child below 18 to build a long-term retirement corpus. The scheme offers market-linked returns, tax benefits, and automatically converts into a regular NPS account when the child attains majority.

NPS Vatsalya Scheme Overview

What is NPS Vatsalya Scheme?

NPS Vatsalya is a pension scheme for minor children launched by the Government of India in 2024 under the National Pension System (NPS). It allows parents or legal guardians to open and manage an NPS account on behalf of a child below 18 years of age and build a long-term retirement corpus through regular contributions.

Unlike a regular NPS account, which is opened and operated by an individual for their own retirement, an NPS Vatsalya account is opened by a parent or guardian for a minor. Once the child turns 18, the account can be converted into a regular NPS account and operated independently. This scheme expands the NPS to cover minor children, providing families with a fresh investment option for their children’s financial security and retirement.

NPS Vatsalya Scheme Features

The following are the minor features of NPS Vatsalya account:

• The Central Recordkeeping Agency (CRA) will issue a unique Pension Retirement Account Number (PRAN) in the name of the minor.
• A fresh KYC will be carried out when the minor is 18 years old. It will be done within 3 months of attaining the majority. 
• The minor can operate the account once he/she attains the majority after KYC completion. 
• NPS Vatsalya scheme offers partial withdrawal and exit options. 

NPS Vatsalya Scheme Interest Rate

NPS Vatsalya offers a market-linked interest rate rather than a fixed rate of return. The NPS Vatsalya Scheme interest rate ranges between 9.5% to 10%.

Who is Eligible for NPS Vatsalya?

• Indian citizens below 18 years
• Non-Resident Indian (NRI) and Overseas Citizenship of India (OCI) individuals below 18 years
• 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

Applicability of NPS Vatsalya Scheme

The NPS Vatsalya Scheme applies to all parents and guardians of minor children. Till the child reaches 18 years, the parents will deposit the minimum amount into the NPS Vatsalya account. Once the child reaches 18 years, the NPS Vatsalya account will be converted to a standard NPS account, and the children can independently operate the standard NPS account. 

How Does NPS Vatsalya Scheme Work?

• A parent or guardian opens an NPS Vatsalya account for the child.
• Parents make regular contributions to build the child's retirement corpus.
• The corpus grows over time through market-linked investment returns.
• The child will complete KYC upon attaining the age of majority (18 years).
• The NPS Vatsalya account seamlessly converts into a regular NPS account.
• The child/ subscriber continues investing until retirement to receive pension benefits.

How to Invest in NPS Vatsalya Scheme?

The parents or guardians can open the NPS Vatsalya Scheme on the eNPS website or through the authorised Point of Presence (PoP). After they open the account, they can make contributions to it through the eNPS website or the authorised Point of Presence (POP) where they opened the account.

How to Open NPS Vatsalya Account Online?

Parents or legal guardians can open an NPS Vatsalya account online through the eNPS platform or through banks and pension service providers.

Step 1: Go to the eNPS platform and select the option to open an NPS Vatsalya account. You can choose a Central Recordkeeping Agency (CRA) such as Protean, KFintech, or CAMS.

Step 2: Provide the child's basic details, including name, date of birth, and contact information. The parent or legal guardian must also furnish their PAN, Aadhaar, and KYC details.

Step 3: Complete the KYC process using Aadhaar-based authentication or other permitted documents. The guardian's KYC is mandatory for opening the account.

Step 4: Choose the pension fund manager and investment option as per your preference. The contributions will be invested and managed under the NPS framework.

Step 5: Pay the minimum contribution required to activate the account. Once the payment is successful, the account will be created and a Permanent Retirement Account Number (PRAN) will be allotted in the minor's name.

Step 6: After successful registration, save the acknowledgement and PRAN details for future contributions and account management. 

How to Open NPS Vatsalya Account Offline?

Step 1: Visit a Point of Presence (PoPs) Service Provider, such as Banks, Pension Funds, Brokers, India Post, etc.

Step 2: Collect the NPS Vatsalya Scheme application form. 

Step 3: Fill out the form, attach the required KYC documents and submit it to the PoPs.

Step 4: Make the initial contribution. The account will be opened after verification, and PRAN will be issued. 

Documents for NPS Vatsalya Scheme

The following documents are required to open a NPS Vatsalya Scheme:

• KYC of the guardian, such as Aadhaar card, passport, driving license, NREGA job card, voter ID card or National Population Register documents
• PAN of the guardian
• Date of birth proof of the minor, such as PAN, birth certificate, matriculation certificate, school leaving certificate or passport
• Signature of the guardian
• Scanned copy of passport, in case of NRI subscribers
• Scanned copy of foreign address proof, in case of OCI subscribers
• NRE/ NRO bank account of the minor, in case of NRI or OCI subscribers

NPS Vatsalya Contribution Rules

Investment Choices Under NPS Vatsalya

The NPS Vatsalya Scheme offers the following investment choices:

• Default Choice: Moderate Lifecycle Fund - LC-50 (50% equity).
• Auto Choice: Aggressive Lifecycle Fund - LC-75 (75% equity), Moderate Lifecycle Fund - LC-50 (50% equity), or Conservative Lifecycle Fund - LC-25 (25% equity).
• Active Choice: Parents can actively decide the allocation of funds across equity (up to 75%), government securities (up to 100%), corporate debt (up to 100%), and alternate asset (up to 5%).

Withdrawal and Exit Rules of NPS Vatsalya

Partial withdrawal 

NPS Vatsalya Scheme provides for partial withdrawal before the child turns 21 years old. The conditions for partial withdrawal from the NPS Vatsalya account are as follows:

• Parents or guardians can withdraw after 3 years of joining NPS
• Up to 25% of contributed amount can be withdrawn
• Withdrawal option is available only 2 times till the child turns 18 
• An additional withdrawal option of 2 times when the child is 18 to 21 years
• Can be withdrawed for the purposes of education, disability of more than 75%, or treatment of specified illnesses, as specified by the PFRDA 

On attaining majority (age of 18 years)

Once the child reaches 18 years:

• The NPS Vatsalya Scheme will continue for 3 years (till the child turns 21 years)
• The child can convert/shift the NPS Vatsalya Scheme corpus to a regular NPS account before attaining 21 years by completing fresh KYC
• The child can also choose to exit from the NPS Vatsalya account once he/she turns major instead of converting it to a standard NPS account. Upon exit, the child can:
  • Fully withdraw the total accumulated corpus if it is less than ₹8 lakh
  • Withdraw up to 80% of the corpus as a lump sum when the total accumulated corpus is more than ₹8 lakh and invest the remaining 20% in annuity
• If no option is exercised by the child on turning 18 (convert to regular NPS or exit), the account auto-shifts to a higher-equity scheme under the Multiple Scheme Framework (MSF) governed by the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015.

Death of Subscriber/ Guardian

In case of unfortunate death, the NPS Vatsalya Scheme rules are as follows:

• Death of the subscriber (minor child): The entire corpus will be returned to guardian, i.e. the nominee
• Death of guardian: Another guardian should be registered under the scheme through fresh KYC
• Death of both parents: Legal guardian of the child can continue the scheme without making contributions until child attains 18 years

Taxation of NPS Vatsalya Scheme

Tax benefits are available to parents for contributions made to NPS Vatsalya accounts under Section 80CCD(1B) of the Income Tax Act, 1961. 

Benefits of NPS Vatsalya Scheme

• Early Retirement Planning: Helps build a retirement corpus for children from an early age, ensuring long-term financial security.
• Long Investment Horizon: Offers decades of investment growth, allowing the corpus more time to grow before retirement.
• Encourages Disciplined Savings: Encourages the child to continue investing in NPS after attaining majority, developing a habit of investing and financial planning over the long term.
• Power of Compounding: Starting early enables investments to benefit from compounding, significantly increasing long-term wealth creation.
• Tax Benefits: Eligible contributions qualify for tax deductions under the applicable provisions of the Income-tax Act, subject to eligibility.
• Flexible Contributions: Invest according to your financial capacity with a low minimum annual contribution and no maximum contribution limit.
• Multiple Fund Choices: Choose from Active Choice or Auto Choice investment options based on your preferred risk profile.
• PRAN Allotment: Every subscriber receives a unique Permanent Retirement Account Number (PRAN) for seamless account management and lifelong tracking.
• Conversion to Regular NPS: The account seamlessly transitions to a regular NPS Tier I account when the child turns 18, ensuring continuity of retirement savings.

Who Should Invest in NPS Vatsalya?

NPS Vatsalya may be suitable for parents and guardians who want to create a long-term retirement corpus for their children while benefiting from disciplined investing and potential tax advantages. The scheme can be a good fit for:

• Parents planning long-term wealth creation for their children through regular contributions over several years.
• Families looking to start retirement planning early so that children have a head start in building a pension corpus.
• Parents comfortable with market-linked investments and willing to stay invested for the long term to potentially earn higher returns than traditional savings schemes.
• Taxpayers seeking tax-efficient investment options as NPS Vatsalya is eligible for tax benefits similar to those available under the NPS framework.
• Parents looking for a flexible investment option with no upper limit on contributions and multiple asset allocation choices.

NPS Vatsalya vs Sukanya Samriddhi Yojana (SSY)

The NPS Vatsalya and Sukanya Samriddhi Yojana (SSY) are both long-term wealth building scheme. However, both scheme are built with different investment structures. 

NPS Vatsalya vs Public Provident Fund (PPF)

The NPS Vatsalya and Public Provident Fund (PPF) are both government-backed long-term investment schemes. However, there are differences in their structure. 

NPS Vatsalya is best suited for investors with a long-term horizon who want to combine retirement planning, wealth creation, and tax savings in a single investment product.