NPS Vatsalya scheme is an option under NPS, regulated by Pension Fund Regulatory Authority of India. It is available to all minor children, using which the parents can secure the financial future of the child. Only guardians can operate this account, wherein the sole beneficiary should be the minor child. After the child crosses 18 years, the account can be converted to NPS account or be withdrawn, subject to conditions. All the tax benefits available under the NPS scheme is now extended to NPS Vatsalya as well.
Read on to know all about the NPS Vatsalya Scheme and its eligibility, benefits, opening process and much more.
Particulars | Details |
Scheme | It is a subset of NPS, which is regulated by PFRDA. |
Eligibility | All minor Indian citizens (under 18 years of age) |
Account Operator | Only parents can open, deposit or withdraw funds from the account. |
Account Beneficiary | Only the minor children can be the beneficiary |
Minimum Contribution Limit | For Account Opening: Rs. 1,000 p.a., For Annual Contribution: RS. 1,000 p.a., |
Maximum Contribution Limit | No maximum contribution limit |
Interest Rate | 9.5 % to 10%. |
Tax Benefits | Up to Rs. 1.5 lakh can be claimed as a deduction under section 80C. Up to Rs. 50,000 can be claimed as a deduction under section 80CCD(1B) |
The following are the minor features of NPS Vatsalya account which are not covered under the key highlights.
The NPS Vatsalya Scheme interest rate ranges between 9.5% to 10%.
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. However, 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. This scheme expands the NPS to cover minor children, providing families with a fresh investment option for their children’s financial security and retirement.
Parents or guardians can open the NPS Vatsalya Scheme on the eNPS website or through Points of Presence (POPs) which include India Post, major banks, Pension Funds, etc.
The process to open NPS Vatsalya Scheme account online is as follows:
Step 1: Visit the eNPS website.
Step 2: Scroll down and click on ‘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.1,000.
Step 8: Complete the dual OTP or e-Sign authentication.
Step 9: The PRAN will be generated and the NPS Vatsalya account will opened in the name of the minor.
The following documents are required to open a NPS Vatsalya Scheme:
The NPS Vatsalya Scheme offers the following investment choices:
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.
NPS Vatsalya Scheme provides for partial withdrawal before the child turns 18 years old. The conditions for partial withdrawal from the NPS Vatsalya account are as follows:
Once the child reaches the age of majority (18 years), the NPS Vatsalya Scheme can be converted into a regular NPS account, which can be managed by the child independently. However, the subscriber (minor) must do a fresh KYC within 3 months of turning 18 years old. The accrued contribution amount in the NPS Vatsalya amount will be transferred to the standard NPS account.
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.
In case of unfortunate death, the NPS Vatsalya Scheme rules are as follows:
Tax benefits are available to parents for contributions made to NPS Vatsalya accounts under Section 80CCD(1B) of the Income Tax Act, 1961. Thus, parents can claim an additional Rs. 50,000 deduction over the Rs. 1.5 lakh limit for NPS Vatsalya Scheme contributions.
The NPS Vatsalya scheme promotes the culture of savings from an early age. Through this scheme, the government aims to ensure that children develop saving habits and also benefit from long-term wealth accumulation through the power of compounding.
Since the NPS Vatsalya account will be transitioned seamlessly to the NPS Tier-I account upon the attainment of 18 years of the child, it provides robust investment opportunities and financial security. It promotes the government's commitment to enhance financial planning and provide a dignified future for all citizens, resulting in comprehensive financial well-being across generations.
Also Read
1. Sukanya Samriddhi Yojana (SSY)
2. National Pension Scheme: Tax Benefits, Eligibility, Returns & Interest Rate