NPS Vatsalya Scheme

The NPS Vatsalya Scheme is a government plan that helps parents build a secure financial future for their child. Launched in the 2024 Union Budget, it allows parents to open a retirement savings account for children below 18 years of age. It also helps develop the habit of saving early and planning for the long term. This article explains how the scheme works, its benefits, and how you can enrol your child. 

How Does the NPS Vatsalya Scheme Work? 

The NPS Vatsalya Scheme allows parents or guardians to open an NPS account for their child and make regular contributions until the child turns 18. 
 

The minimum yearly contribution is Rs. 1,000, with no maximum limit. The money is invested in market-linked options managed by fund managers registered with PFRDA. Parents can choose from three investment options: Moderate, Active, or Auto mode. 
 

Once the child turns 18, the account automatically changes into a regular NPS account. The child can manage it independently, continue investing, and use the savings for retirement planning. At maturity, they can choose to buy an annuity for regular income or withdraw a part of the amount. 
 

Starting early helps build a strong financial base for the child’s future. 

Why Consider the NPS Vatsalya Scheme? 

Many parents see this scheme as a clear improvement over traditional long-term savings plans. Here’s why it makes a real difference: 

• Build Early Financial Foundation: Childhood investments and savings create a decent retirement fund through the compounding effect over several decades. 
• Government-Backed Security: The program is government-supported, thus assuring the trustworthiness and safety of the investment management. 
• Market-Linked Growth: The investment in equity and debt instruments gives an opportunity to get potentially higher returns than traditional savings schemes. 
• Affordable Entry: The minimum contribution of Rs. 1,000 per year makes it a program that is accessible to families of any income level. 
• Tax Benefits: The amounts paid in contributions can be claimed as tax deductions under Section 80C of the Income Tax Act, thus reducing your tax liability. 
• Teaches Financial Discipline: When the children take over at 18, they acquire knowledge on how to plan for the future financially and manage the wealth through the experience of long-term financial planning and wealth management. 

 Understanding what is nps vatsalya scheme is crucial for parents. Further in the article, how to open an NPS Vatsalya account and the documents required are discussed. 

How to Open an NPS Vatsalya Account? 

Opening an account is simple and flexible. You can choose what works best for you. 

Online Method 

1. Visit the official NPS website or use the NPS mobile app 
2. Select “NPS Vatsalya – New Registration” 
3. Enter the child’s and guardian’s details 
4. Upload KYC documents 
5. Choose your investment option 
6. Make the initial contribution 
7. Receive the child’s PRAN after submission 

Offline Method 

1. Visit a nearby Point of Service (PoS) such as a bank or post office 
2. Fill out the form and submit documents 
3. Choose investment preference and make payment 
4. PRAN is issued within 7–10 working days 

Through Intermediaries 

Banks and registered financial advisers can also help you open the account with guided support. 

Eligibility Criteria For NPS Vatsalya Scheme 

• Child must be below 18 years and an Indian citizen 
• Account must be opened by a parent or legal guardian 
• KYC is mandatory for both guardian and child 
• NRIs can open accounts for their minor children 
• Only one account per child is allowed 

Documents Required for NPS Vatsalya Scheme 

For the Guardian 

• Aadhaar Card 
• PAN Card 
• Passport / Driving Licence / Voter ID (as applicable) 

For the Child 

• Birth Certificate (mandatory) 
• Aadhaar Card (if available) 
• School or passport documents (if applicable) 

For NRI Guardians 

• Child’s NRE/NRO bank account details 
• Overseas address proof 
• Valid passport and visa 

Features of NPS Vatsalya Scheme 

This section highlights the main features that make the NPS Vatsalya Yojana flexible, affordable, and easy to manage. 

• Minimum Annual Contribution: Rs. 1,000 with no maximum limit 
• Investment Options: Choice between Active, Moderate, and Auto investment modes 
• Asset Allocation: Funds invested across equity, corporate bonds, and government securities 
• Account Management: Online and offline account management facilities available 
• Flexible Contributions: Lump sum or regular contributions as per convenience 
• Automatic Conversion: Seamless conversion to regular NPS account at age 18 
• Low Charges: Minimal account maintenance and fund management charges 
• Portability: Account can be transferred across any PoS or state 
• Transparency: Regular account statements and online tracking facility 

Benefits of NPS Vatsalya 

Here’s a look at how the scheme supports long-term wealth creation, tax savings, and financial security. 

• Long-term Wealth Creation: Compounding benefits over decades create substantial retirement corpus 
• Market-Linked Returns: Potential for higher returns through professional fund management 
• Tax Advantages: Contributions eligible for deduction under Section 80C up to Rs. 1.5 lakh 
• Financial Security: Builds retirement fund ensuring child's financial independence 
• Low-Cost Investment: Among the lowest expense ratios in pension schemes 
• Government Oversight: Regulated by PFRDA ensuring transparency and accountability 
• Flexible Withdrawals: Partial withdrawal options available after specific conditions 
• Life Insurance Cover: Optional insurance coverage for added protection 
• Financial Literacy: Teaches children about retirement planning from young age 

NPS Vatsalya Withdrawal Rules 

This section explains when and how withdrawals can be made at different stages of the account. 

NPS Vatsalya Scheme Exit Rules 

Below are the exit options available under different situations such as maturity, early exit, disability, or NRI status. 

• Normal Exit (At Maturity - Age 60) - When your child reaches 60 years or superannuation, they can exit the scheme. At least 40% of the accumulated corpus must be used to purchase an annuity that provides regular pension income. The remaining 60% can be withdrawn as a lump sum. 
• Premature Exit (Before Age 60) - If your child wishes to exit before turning 60, 80% of the corpus must be invested in an annuity for pension income. Only 20% can be withdrawn as a lump sum. This rule ensures continued retirement security. 
• Exit Due to Death - In case of the subscriber's death, the entire corpus is paid to the nominee or legal heir. The nominee can choose to receive the entire amount as lump sum without any annuity requirement. 
• Exit Due to Disability - If the child becomes permanently disabled and cannot continue contributing, the entire accumulated corpus can be withdrawn without any mandatory annuity purchase requirement. 
• Exit for NRI Status - If the subscriber becomes a Non-Resident Indian and wishes to close the account, they must follow premature exit rules - 80% annuity purchase and 20% lump sum withdrawal. 

Conclusion 

The NPS Vatsalya Scheme offers parents a systematic way to build a retirement fund for their children. Starting early enhances the benefits of compounding, potentially creating significant wealth over time. With government backing, low costs, tax benefits, and flexible investment options, this scheme serves as both a savings tool and a financial education platform for children. If you're looking to manage investments and track your child's financial portfolio, consider using a reliable online trading app. A good trading app can help you monitor various investment options, making it easier to plan your family's financial future comprehensively.