The Modi government has introduced a new scheme under the National Pension System (NPS) called NPS Vatsalya, which allows parents and guardians to open an NPS account in the name of their minor children. This initiative aims to provide financial security and stability for children as they grow into adulthood, ensuring they have a solid foundation for their future career and retirement.
What is NPS Vatsalya Scheme?
NPS Vatsalya is a variant of the existing NPS, specifically designed for young individuals. Under this scheme, parents or guardians can open an NPS account for their child and contribute a fixed amount either monthly or annually until the child reaches 18 years of age. The scheme allows families to plan for their children’s future by investing early and ensuring a secure financial foundation.
Key Features of NPS Vatsalya Scheme
- Eligibility: Unlike the traditional NPS, which requires the account holder to be between 18 and 70 years of age, NPS Vatsalya allows minors to have an account opened in their name.
- Account Ownership: Only one account can be opened for each child. The account will be managed by the parent or guardian until the child turns 18, at which point the account ownership is transferred to the child.
- Investment Flexibility: Parents can invest a minimum of ₹500 per month or up to ₹1.50 lakh per year. Upon reaching adulthood, the child has the option to either withdraw the entire amount or continue the investment until the age of 60.
Long-Term Benefits of NPS Vatsalya Scheme
Investing in an NPS Vatsalya account can yield substantial returns over time. For instance, if a parent invests ₹5,000 per month, the total investment would be ₹10.80 lakh by the time the child turns 18. Assuming an annual return of 10%, the total fund could grow to ₹30.27 lakh. If the account is continued until the child reaches 60, the potential fund could be as much as ₹20.50 crore, providing a significant pension post-retirement.
How to Open an NPS Vatsalya Scheme Account
Opening an NPS Vatsalya account is a simple process. The account can be opened online through the Pension Fund Regulatory and Development Authority (PFRDA) website, eNPS. Public and private banks also offer this service.
Why NPS Vatsalya Scheme is Beneficial
- Conversion Flexibility: The NPS Vatsalya account can be converted into a regular NPS account once the child turns 18.
- Withdrawal Options: The child can choose to withdraw the full amount upon reaching 18 without converting the account.
- Portability: The account remains unchanged even if the parent or child changes jobs.
- Long-Term Growth: Continued investment over a long period can accumulate a large fund.
- Tax Benefits: Upon retirement, 60% of the accumulated amount can be withdrawn tax-free.
NPS Vatsalya is a government initiative that allows parents and guardians to open a National Pension System (NPS) account for their minor children to secure their financial future.
Parents or guardians can open an NPS Vatsalya account for their minor children.
You can invest a minimum of ₹500 per month or up to ₹1.50 lakh per year.
The account ownership is transferred to the child, who can either withdraw the full amount or continue the investment until they reach 60 years of age.
Yes, 60% of the accumulated amount can be withdrawn tax-free upon retirement.