In July 2024, Finance Minister Nirmala Sitharaman introduced a new scheme focused on children’s pensions as part of the National Pension System (NPS). This scheme, known as the NPS Vatsalya Scheme, officially began on September 18.
It’s designed to allow parents to invest for their children’s future through a pension account, giving them the chance to benefit from long-term compounding rates. Any minor under 18 years old can participate, making it an accessible option for families looking to secure their child’s financial future.
Key Features of the NPS Vatsalya Scheme
The NPS Vatsalya Scheme has several attractive features. Parents can start investing with a minimum annual deposit of Rs 1,000, but there’s no cap on how much they can invest. To open an account, the child must have a PAN and Aadhaar card.
Once the child turns 18, the account transitions to a standard NPS account. After a lock-in period of three years, parents can withdraw up to 25% of the amount three times. Also, while amounts above Rs 2.5 lakh can be divided into an annuity and a lump sum, amounts up to Rs 2.5 lakh can be fully withdrawn if needed.
Documents Needed for NPS Vatsalya Account
To open an NPS Vatsalya account, certain documents are required. The minor must provide proof of age, which can include a birth certificate, school leaving certificate, or PAN card. Additionally, the guardian needs to submit KYC documents for identity and address verification, such as an Aadhaar card, driver’s license, or passport. If the guardian is an NRI, the minor must have an NRE/NRO bank account. This straightforward process ensures that more families can take advantage of this beneficial scheme to invest in their children’s future.
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Finance Minister Nirmala Sitharaman introduced the NPS Vatsalya Scheme in the July 2024 budget, aimed at children’s pensions under the National Pension System (NPS). Launched on September 18, this scheme allows parents to invest a minimum of Rs 1,000 annually for children under 18. The account converts to a standard NPS account when the child turns 18. Features include potential withdrawals after three years, annuity options for larger amounts, and significant long-term returns, potentially reaching Rs 11.05 crore by age 60. Required documents include the minor’s proof of age and guardian’s KYC.
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