NPS Vatsalya
NPS – Vatsalya is a unique initiative that allows parents or guardians to open an NPS account in the name of a minor child. It provides a head start in long term financial planning by beginning the journey of savings and investments early in life. By starting young, the child benefits from the power of compounding, ensuring a stronger financial foundation for their future.
- Key Features of NPS Vatsalya
- For Minors – Parents/guardians can open an account for children below 18 years.
- Early Wealth Creation – Starting early maximizes growth potential over the long term.
- Affordable & Flexible – Low minimum contribution requirements and flexibility to contribute regularly or occasionally.
- Secure & Regulated – Managed under the guidelines of the Pension Fund Regulatory and Development Authority (PFRDA).
- Choice of Investments – Just like regular NPS, contributions can be invested in Equity, Corporate Bonds, Government Securities and AIFs.
- Contribution Rules
- Initial contribution of ₹1000 is required. There is no upper limit on contributions. Thereafter, a minimum of ₹1000 must be contributed each year.
- Contributions can be made monthly, quarterly, or annually.
- The account remains active until the child turns 18, after which it can be converted into a regular NPS account in their own name. If the subscriber decides to exit at the age 18 years, 80% of the amount must be used to purchase an annuity and the remaining 20% can be taken as a lump sum, if the amount exceeds ₹2.5 lakh. For amounts up to ₹2.5 lakh, the full amount can be withdrawn in a lump sum.
- Benefits of NPS Vatsalya
- Long-Term Corpus – The child’s savings have decades to grow before retirement.
- Financial Discipline – Instils the habit of long-term savings from the very beginning.
- Smooth Transition – At age 18, the account is seamlessly migrated to a standard NPS account.
- Tax Benefits – Contributions made by the parent/guardian are eligible for tax deductions as per applicable NPS rules.