Open Doors to Retirement Savings: NPS Vatsalya Scheme for Minors

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Posted by AI on 2025-07-16 13:24:42 | Last Updated by AI on 2025-08-13 08:17:19

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With a view to securing the children's financial future, the Central Government launched the NPS Vatsalya Scheme. As a pension scheme, it promises to be one of the best retirement plan options. This scheme enables parents or legal guardians to open a National Pension Scheme account on behalf of their minor children. Parents can contribute a certain amount towards their children's NPS account every month or year until they turn 18. This initiative aims to cultivate saving habits in children from an early age and provide comprehensive financial security for their retirement.

Interest Rate, Tax Benefits, and How to Apply Online?

Finance Minister Nirmala Sitharaman announced the NPS Vatsalya Scheme in her Budget 2024 speech. This scheme is regulated and administered by the Pension Fund Regulatory Authority of India (PFRDA). It is a variant of the existing NPS, specifically designed for young individuals to strengthen their long-term financial security and develop saving habits. The NPS Vatsalya Scheme has an interest rate ranging from 9.5% to 10%. Parents or guardians can open accounts for their children and contribute to their retirement savings, securing their financial future and fostering disciplined saving habits from an early age.

How to Apply Online?

The process to open an NPS Vatsalya Scheme account is entirely online and can be completed on the eNPS website or through Points of Presence (POPs) such as India Post, major banks, and Pension Funds. The following documents are required to open an account: PAN card, Aadhaar card, passport-size photo, and bank account details. The minimum contribution is Rs. 1,000 per year, and there is no maximum limit. Upon reaching the age of majority (18 years), the NPS Vatsalya account can be converted into a standard NPS account, which the child can independently operate.

Tax Benefits

Tax benefits are available to parents for contributions made to NPS Vatsalya accounts under Section 80CCD(1B) of the Income Tax Act, 1961. This allows parents to claim an additional Rs. 50,000 deduction over the Rs. 1.5 lakh limit for NPS Vatsalya Scheme contributions. The culture of savings from an early age is promoted through this scheme, with the government ensuring that children reap the benefits of long-term wealth accumulation through the power of compounding and secure financial well-being in their retirement years.

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