NPS Vatsalya is a savings and pension scheme for children under the National Pension System (NPS). Parents and guardians can open an account for a child and build a retirement fund from an early age. The scheme was launched by the Union Finance Minister in September 2024. Here is a guide.
Who regulates it
NPS Vatsalya is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and run under the National Pension System framework.
Who can open an account
- Any Indian citizen below 18 years, including NRI and OCI minors, can be a beneficiary.
- The account is opened and operated by a parent or guardian.
- The child is the sole beneficiary of the account.
Contribution
- Minimum contribution of Rs 1,000 at opening and Rs 1,000 a year after that.
- There is no upper limit.
- Contributions can be made online or through banks and points of presence.
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Investment choices
Parents can choose how the money is invested, such as a default option with a mix of equity and debt, or an auto choice with different risk levels. The money is managed by PFRDA registered pension fund managers.
Partial withdrawal
After a lock in period of three years, up to 25 percent of the contributions can be withdrawn for specified purposes such as:
- Education.
- Treatment of specified illnesses.
- Disability above a certain level.
Partial withdrawal is allowed a limited number of times before the child turns 18.
What happens at 18
When the child turns 18, the account can be shifted to a regular NPS Tier I account after fresh KYC in the child’s name. The child can also exit as per rules, with a part of the corpus used to buy an annuity if it crosses a set limit. Check the latest PFRDA guidelines for exit conditions.
Tax benefit
The Union Budget 2025 allowed contributions to NPS Vatsalya to be claimed for deduction up to Rs 50,000 under the old tax regime, within the overall limit for NPS contributions.
How to open
- Visit the eNPS website or the app of a participating bank or post office.
- Enter the guardian’s PAN and Aadhaar details and the child’s date of birth.
- Upload the child’s proof of date of birth.
- Make the first contribution.
- A Permanent Retirement Account Number (PRAN) is generated for the child.
Who should consider it
NPS Vatsalya suits parents who want to build a long term fund for their child with the discipline of a pension product. Since withdrawals are restricted, it is not meant for short term goals.
Bottom line
NPS Vatsalya lets parents start their child’s retirement savings early with as little as Rs 1,000 a year. The power of compounding over decades can build a large corpus.
Source / स्रोत: Pension Fund Regulatory and Development Authority, NPS Trust, Press Information Bureau
