NPS ‘Vatsalya’ Scheme to Launch on September 18: Parents Can Invest on Behalf of Children

Union Finance Minister Nirmala Sitharaman will launch the NPS ‘Vatsalya’ scheme on September 18 in Delhi. Business Standard, citing sources, has reported this news. Finance Minister Nirmala Sitharaman had announced this scheme while presenting the 2024 Budget.

NPS Vatsalya Ensures Economic Security for Children

The NPS Vatsalya is designed to ensure the financial security of children. Parents can invest in this scheme on behalf of their children as they grow up. Upon reaching maturity, the account will be converted into a regular NPS account.

NPS Helps Build a Retirement Fund

When the child turns 18, NPS ‘Vatsalya’ can also be converted into a non-NPS scheme. The regular NPS scheme helps in building a retirement fund. Contributions to the NPS are invested in market-related instruments like equities and bonds for higher returns.

A ₹10,000 SIP Can Grow into ₹63 Lakh Fund

All parents and guardians, whether Indian citizens, NRIs, or OCIs, can open an NPS Vatsalya account for their minor children. Suppose your child is 3 years old. If you invest ₹10,000 through SIP in this scheme, a fund of approximately ₹63 lakh can be accumulated by the time the child turns 18.

NPS Launched in 2004, Provides Regular Income at Retirement

NPS was launched in 2004 to provide retirement income to all Indian citizens. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Subscribers can choose to allocate their funds between equities, corporate bonds, and government bonds, based on their preference. There is also an option to choose the Auto Choice Lifecycle Fund.

Upon retirement, part of the corpus is used to purchase an annuity. The scheme also offers tax benefits under Sections 80C and 80CCD(1B) of the Income Tax Act.

Two Types of NPS Accounts Available from Banks

There are two types of accounts available under NPS. The Tier I account has withdrawal restrictions and requires a minimum investment of ₹500. The Tier II account provides liquidity with a minimum contribution of ₹1,000. Both accounts can be opened through banks.