Summary: The NPS Vatsalya Scheme, introduced in the 2024 Indian Budget by Finance Minister Nirmala Sitharaman, is designed to promote financial security for children by enabling parents or guardians to save for their children’s retirement. This pension plan allows parents, including NRIs and OCIs, to open a National Pension Scheme (NPS) account for their minor children. Contributions can be made monthly or annually until the child turns 18, after which the account transitions into a standard NPS account, allowing the child to manage it independently. The scheme encourages long-term financial planning, teaching children about savings and responsible financial management. With a minimum contribution of ₹1,000 per year, there is no upper limit on investments, and contributions are typically invested in market-linked instruments such as funds and bonds, offering potentially higher returns. By starting contributions during childhood, the NPS Vatsalya Scheme aims to accumulate significant retirement savings for the child, ensuring financial independence and security in later life. The scheme officially launches on September 18, 2024, under the management of the Pension Fund Regulatory and Development Authority (PFRDA).
Introduction: NPS Vatsalya Scheme was proposed by the Finance Minister of India, Shrimati Nirmala Sitharaman, vide Budget 2024. The Scheme aims to promote long-term financial planning and security of children. The Scheme marks a step towards building India’s future generations more financially secure as well as independent.
The gist of NPS Vatsalya Scheme is that parents of the minor children can start saving for their children’s retirement. Thus, NPS Vatsalya Scheme is a pension plan for children.
NPS Vatsalya Scheme is going to be launched on 18th September 2024. PFRDA i.e. Pension Fund Regulatory and Development Authority will manage the Scheme.
The present article covers features of NPS Vatsalya Scheme; eligibility and applicability under NPS Vatsalya Scheme; benefits of NPS Vatsalya Scheme and some relevant Frequently Asked Questions.
Page Contents
What are the Features of NPS Vatsalya Scheme
The features of NPS Vatsalya Scheme are highlighted hereunder –
- NPS Vatsalya is a Scheme designed for minor children;
- Under the Scheme, parents/ guardians can open a NPS account in the name of their minor children;
- After opening the NPS account, parents/ guardians can contribute an amount on monthly/ yearly basis till the children reach the maturity age of 18 years;
- NPS account, opened under NPS Vatsalya Scheme, will be converted into a standard NPS account once the children reaches 18 years of age;
- Thereafter, the standard NPS account can be independently managed by the major children.
In nut-shell, NPS Vatsalya Scheme enables parents/ guardian to begin savings for their children and contribute the amount till they reach maturity age of 18 years.
What is the Eligibility and applicability under NPS Vatsalya Scheme?
Following are the categories of persons eligible to apply under NPS Vatsalya Scheme –
- Parents/ guardian being citizen of India and having minor children;
- Parents/ guardian being Non-resident Indian (NRI) and having minor children;
- Parents/guardian being OCIs (i.e. Overseas Citizen of India) and having minor children.
Notably, NPS Vatsalya Scheme will be applicable only till the children reaches the age of 18 years. Post children attaining maturity age, NPS account opened under NPS Vatsalya Scheme will get converted into a standard NPS account.
Importantly, the minimum contribution limit under NPS Vatsalya Scheme is INR 1000 per year. However, there is no maximum contribution limit.
What are the Benefits of NPS Vatsalya Scheme
Important benefits of NPS Vatsalya Scheme are highlighted hereunder –
- It promotes long-term financial planning and security for children;
- It enables children to develop saving habits as after attaining the maturity age children can independently handle the NPS account;
- It works as a good retirement fund option as contribution into the NPS account begins at the time when the children is minor;
- It will offer handsome amount to the children on their retirement as contribution begins when the children is minor and obviously the accumulated amount rewarded at the time of children retirement would be huge;
- It teaches children responsible financial management from very tender age.
- It offers parents/ guardian a systematic approach to ensure their children’s financial security;
- Contribution to NPS are generally invested in marked linked instruments such as funds and bonds and hence they will comparatively offer higher returns.
Frequently Asked Questions (FAQs) on NPS Vatsalya Scheme
1. What is the NPS Vatsalya Scheme?
NPS Vatsalya Scheme, launched by the Government of India, is a pension scheme for children. Under the Scheme, parents/ guardian can open a NPS account and contribute an amount till the children attains the maturity age of 18 years.
2. Who is eligible for Vatsalya Scheme?
Parents/ guardian, whether Indian citizen; NRI or OCIs, for minor children are eligible for Vatsalya Scheme.
3. How to open NPS Vatsalya account?
NPS Vatsalya account can be opened by the parents/ guardian of the minor children.
4. Can your child continue NPS Vatsalya after turning 18?
NPS Vatsalya account will be applicable till the children attains the maturity age of 18 years. Thereafter, the NPS Vatsalya account will get converted into a standard NPS account.
5. What is minimum and maximum investment limit under NPS Vatsalya?
Minimum investment limit under NPS Vatsalya is INR 1,000. Whereas, there is no maximum investment limit fixed under NPS Vatsalya.
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