Finance Minister Nirmala Sitharaman announced the NPS Vatsalya Yojana under the Union Budget 2024. Now the scheme has been launched. It is a pension scheme for minors. The aim of this scheme is to save for the future of children and accumulate wealth for a long time. The minimum contribution amount in this is Rs 1,000 per annum.
NPS Vatsalya: The government has launched a new pension scheme for minor children. Its name is ‘NPS Vatsalya’. Finance Minister Nirmala Sitharaman announced it in the Union Budget of July 2024. This scheme has been started at 75 places across the country. So far more than 250 PRAN (Permanent Retirement Account Numbers) have been allotted to the children. NPS Vatsalya Yojana gives parents a golden opportunity to save for the future of their children. Under this scheme, parents can open a pension account in the name of their children. This gives them an opportunity to take advantage of compound interest in the long term. Flexible options of contribution and investment are available in NPS Vatsalya Yojana. In this, parents can deposit a minimum of Rs 1,000 annually. It is convenient for families with every financial status.
Recently, while launching this scheme, Finance Minister Nirmala Sitharaman said that NPS Vatsalya is a long-term financial plan for all citizens. This is an important step in the government’s commitment to promote security. The scheme will not only secure the future of the subscribers, but it is also based on the principle of equity. This provides security cover for both the elderly and young generations of the family.
According to Sitharaman, NPS Vatsalya will encourage the youth to develop the habit of saving. Due to compound interest, they will be able to accumulate a large capital. This scheme will provide individuals a respectable life in their old age.
How much money can you save?
According to the official X handle of Press Information Bureau in Chandigarh, the details of how much you can save for your child in the ‘NPS Vatsalya’ scheme are as follows:
Annual contribution: Rs 10,000
Investment period: 18 years
Estimated fund at age 18: Rs 5 lakh @10% return rate (RoR)
Estimated fund at age 60:
@10% RoR: Rs 2.75 crore
@11.59%* RoR: Rs 5.97 crore
@12.86%# RoR: Rs 11.05 crore
Key Features of NPS Vatsalya
Eligibility Criteria: Any minor, who has a PAN card and Aadhaar card and is below 18 years of age, is eligible for the scheme.
Minimum contribution: A minimum contribution of Rs 1,000 can be made annually. There is no limit on the maximum contribution.
Contributor to the scheme: Parents/guardians can contribute on behalf of their children.
Conversion after 18 years of age: The NPS account of the minor will be converted to a Standard NPS account after submission of required KYC documents.
Some special rules related to the scheme
Withdrawal of up to 25% of the contribution is allowed after a lock-in period of 3 years for education, critical illness and disability. Maximum three times.
Seamless transition to NPS Tier – I (All Citizens) on attaining the age of 18 years.
Withdrawal allowed on attaining the age of 18 years
Corpus above Rs 2.5 lakh: 80% of the corpus is used to buy annuity and 20% can be withdrawn as lump sum.
Corpus of Rs 2.5 lakh or less: The entire corpus can be withdrawn as a lump sum.
On death the entire corpus will be returned to the guardian.
What documents are required to open an account?
According to the NPS Trust website, the documents required to open an NPS Vatsalya account are as follows:
- Proof of date of birth of the minor (Birth Certificate, School Leaving Certificate/Matriculation Certificate, PAN and Passport).
- Guardian’s KYC will be done by submitting proof of identity and address (Aadhaar, Driving License, Passport, Voter ID Card, NREGA Job Card and National Population Register).
- NRE/NRO bank account of the minor (single or joint) if the guardian is an NRI.
