What is NPS Vatsalya Scheme Key Features & Benefits

Any parent's biggest worry is how to provide the best future for their children. Rising costs and current market uncertainties further intensify this worry. The government of India recognized this concern and introduced a pension scheme for children called the NPS Vatsalya in the Union Budget 2024. The NPS Vatsalya scheme allows parents to invest on behalf of their children and accumulate a corpus for their future. Read on to find out the NPS Vatsalya scheme details and benefits.

What is NPS Vatsalya?

To put it simply and to understand the NPS Vatsalya meaning, it is a savings-cum-pension scheme for children. In this scheme, parents and guardians can start a pension account for their children by contributing a specific amount every month until the child turns 18. The minimum monthly investment is INR 1000, and there is no maximum cap.

When the child turns 18, the child can either choose to convert the NPS Vatsalya account into a regular NPS account or withdraw the accumulated amount. The conditions of withdrawal are as follows:

• The child can withdraw the entire amount if the accumulated amount is less than INR 2.5 Lakh.
• If the accumulated amount is more than INR 2.5 Lakhs, 80% is re-invested in an annuity plan, and 20% can be withdrawn.

Who are eligible for the NPS Vatsalya scheme?

All Indian citizens under 18 are eligible for an NPS Vatsalya account. It will be opened and operated by parents or guardians. In other words, parents or guardians will be the nominees of the account, while the child will be the sole beneficiary.

Apart from minor Indian citizens, minor non-resident Indians (NRIs) and minor overseas Indian citizens (OICs) are also eligible for NPS Vatsalya.

What are NPS Vatsalya scheme benefits?

The key features of NPS Vatsalya include:

#1 Long-term protection

The scheme is aimed at creating a long-term financial security net by parents or guardians for their children.

#2 Market linked investments

The funds contributed by parents in their child's NPS Vatsalya account are invested in market-based options (stocks, debt funds, [1] equity, etc.), which can yield higher returns than conventional investment options like PPF.

#3 Flexible contributions

Parents can contribute to their child's NPS Vatsalya account as regular payments or lump sums, depending on their financial situation.

#4 Flexible payout options

Upon reaching maturity, the child can continue the NPS account or withdraw the amount in a lump sum.

#5 In-built life insurance

In this scheme, life insurance coverage is provided to the child by default if something happens to the parents or guardians during the investment period.

#6 Partial withdrawals

After a three-year investment period, parents or guardians can partially take out up to 25% of the accumulated corpus for the child's education or treatment of illness or disability.

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The government has not yet notified about the NPS Vatsalya tax benefit. Are you looking for investment options with tax savings? Try Tata Capital's Moneyfy app. Here, you can compare and contrast various investment options and choose the one that gives you the maximum tax savings. Visit the Tata Capital Moneyfy website or download the Tata Capital Moneyfy app today and say yes to intelligent investing from the comfort of your home.