NPS Vatsalya Scheme: Benefits and the Process for Opening an Account

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NPS Vatsalya Scheme: Benefits and the Process for Opening an Account

NPS Vatsalya Scheme has been a trending government scheme. This scheme was launched by the Finance Minister Nirmala Sitharaman in September 2024. By contributing under this scheme, the parents can save up money for their children. Are you curious about NPS vatsalya details, including its benefits and how to open to NPS vatsalya account? If your answer is yes, then this article is for you!

About NPS Vatsalya Scheme

Lately, many people have been curious about what NPS vatsalya scheme is. It is basically a central government scheme that allows parents and guardians to start a New Pension Scheme for their children. 

Under the NPS vatsalya scheme, parents and guardians can start an NPS account for their children who are still minors, and contribute a certain amount of money every month or year till their child turns 18. You do not need to contribute a large sum of money under this scheme. You can invest as little as Rs. 1,000 per year. However, there isn’t any limit on the maximum contribution which can be made. After the child reaches adulthood, the vatsalya account can be converted into a regular NPS account or another non-NPS scheme. 

NPS vatsalya is basically a variant of the existing NPS, but what sets it apart is the fact that it is tailored exclusively for the minor children. Even though the scheme is a new one, it is undisputedly one of the best retirement options which guarantees the financial security of children. Just like in the case of regular National Pension Scheme, the NPS vatsalya scheme is also regulated and administered by Pension Fund Regulatory and Development Authority (PFRDA). As it is a government backed scheme, the contributing parents do not have to worry about the security of their money. 

National Pension Scheme - Vatsalya Scheme Eligibility

Before you open an NPS vatsalya account for your child, you must make sure your child is eligible for the same. Here is the eligibility criteria and conditions for opening an account under NPS vatsalya scheme:

• The child must be an Indian citizen below 18 years of age; or

• The child must be a Non-Resident Indian (NRI)/Overseas Citizen of India (OCI) below 18 years of age.

• Account must be opened in the minor’s name but must be operated by the guardian.

• Minor must be made the NPS vatsalya account’s sole beneficiary.

Documents Required for NPS Vatsalya

To open an NPS Vatsalya account, the following documents are necessary:

• Proof of Date of Birth for the Minor: For this, you can submit any of these - Birth Certificate, School Leaving Certificate, Matriculation Certificate, PAN, or Passport. 

• KYC of Guardian: For this, the guardian must submit proof of identity and address, which can include Aadhaar, Driving License, Passport, Voter ID card, NREGA Job Card, or National Population Register documents.

• Guardian’s Permanent Account Number (PAN) or Form 60 declaration, as per Rule 114B.

• In case the guardian is an NRI or OCI, the minor’s NRE/NRO Bank Account (solo or joint) details are required.

How to Open NPS Vatsalya Account?

The interested individuals can open an NPS vatsalya account through Point of Presence (POPs) registered with PFRDA, including major banks and India Post Pension. For the complete list of POPs, you can check out the NPS trust website. 

NPS Vatsalya Scheme Benefits

NPS vatsalya scheme offers a wide range of benefits, such as:

Let’s discuss each of these benefits one by one:

1. Encourages Saving Habits: We come across people who tell us that they wish they had started saving their money sooner. The NPS vastalya scheme encourages individuals to develop a habit of saving their money from an early age. 

2. Financial Security: The NPS vatsalya scheme is a promise for long-term financial stability. This scheme allows the NPS vatsalya account to be converted into a standard NPS account when the child attains the age of maturity by turning 18 and allowing the child to continue a credible and trustworthy reliable retirement fund backed by the central government.

3. Financial Education for Children: Many children are not provided with financial education at a young age. However, it is extremely important for them to be financially educated, so that they don't face any trouble managing their finances growing up. National pension scheme registration for vatsalya scheme teaches the minors how to manage their money in a responsible manner from a young age, and then by the time they mature, saving money becomes a habit.

4. Provides Retirement Corpus: NPS vatsalya account allows individuals to build a substantial retirement corpus when contributions in the NPS account are made from an early age. It is not a one-time savings effort, but several years. Hence, the corpus is a considerable amount of money which can be really helpful for supporting the children when they grow up. 

5. Systematic Financial Planning: The new pension scheme and national pension scheme of Vatsalya provides individuals a systemic way to secure their little one’s financial future and build a substantial retirement corpus.

Conclusion

The new NPS scheme known as Vatsalya Scheme is a new initiative of the central government. Through this scheme, the government aims to encourage parents and guardians to secure the financial future of their children. As opposed to various government schemes, NPS vatsalya scheme is also available to NRI and OCI children. You do not need to contribute a large sum of money to open NPS vatsalya account. You can start with a contribution of as little as Rs. 1000 per year.

FAQs on NPS Vatsalya Scheme 

Q1. Is an NRI child eligible for NPS vatsalya scheme?

A. Yes, an NRI child is eligible for NPS vatsalya scheme.

Q2. What is the minimum contribution amount which can be made under NPS vatsalya scheme?

A. The minimum contribution amount which can be made under National Pension Scheme (NPS) Vatsalya Scheme is Rs. 1000.

Q3. Can a minor operate an NPS vatsalya account?

A. No, until a child reaches the age of 18, his account is managed by his parent or guardian on his behalf.

Q4. Can NPS vatsalya account money be withdrawn before reaching maturity age?

A. Yes, withdrawal up to 25% of contribution is permitted after a lock-in period of 3 years. However, this withdrawal is only allowed for education, specified illness, and disability. The contribution amount for such reasons can be withdrawn for a maximum of three times.

Q5. What happens to the contribution made under NPS vatsalya account in case of the beneficiary child’s death?

A. In this unfortunate case, the entire corpus will get returned to the guardian/nominee.

Q6. How can you find out the pension amount you will receive under NPS after reaching the retirement age of 60?

A. For knowing the exact figure, you can use a national pension scheme calculator. Many websites offer this facility. 

Q7. What are the tax benefits of the NPS vatsalya scheme?

A. At present, there aren’t any tax benefits offered by the NPS vatsalya scheme.

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