On September 18, 2024, Union Finance Minister Nirmala Sitharaman introduced the NPS Vatsalya plan. On its first day, it attracted 9,705 minor subscribers. In this article we will discuss everything about the NPS vatsalya scheme.
What is the NPS vatsalya scheme
The program is a component of the National Pension System (NPS). It is managed by the Pension Fund Regulatory and Development Authority (PFRDA). It attempts to assist parents and guardians in starting their children’s retirement savings at a young age.The NPS Vatsalya initiative garnered a resounding reaction, as per PFRDA. 2,197 accounts out of the 9,705 minor subscribers that registered on Day 1 were opened solely via the e-NPS portal.
Similar to the National Pension System, the program’s goal is to assist parents, guardians, and Non-Resident Indians (NRIs) in providing for their children’s financial future by gradually increasing their retirement fund. Parents can benefit from the power of compounding by starting early. It will make it simpler to acquire wealth over time. All Indian citizens are eligible for the program, and guardians may open NPS Vatsalya accounts on behalf of their underage children.This provides parents with a great chance to plan financially and lays the groundwork for their children’s financial security in the future.
NPS Vatsalya Registration Online
We can apply for the NPS vatsalya registration online through the following process;
Go to the NPS website: Visit the NPS Vatsalya platform or the official National Pension System (NPS) website.
Click “Register”: To begin the process, click the “Register” button on the site or in the NPS Vatsalya area that is dedicated for it.
Enter the necessary information: Input all the required data. It includes the minor’s and the guardian’s details.Make a first contribution: Once the account has been created, add Rs 1,000 to it. Following this, the NPS Vatsalya account will be formally opened in the minor’s name by generating the PRAN (Permanent Retirement Account Number).
How to open NPS vatsalya?
To open the NPS vatsalya account, follow the following process; An authorized Point of Presence (PoP), such as major banks, India Post, pension fund firms, and other authorized entities, is the alternative means of opening an NPS Vatsalya account. You can accomplish this through their online platforms or in person.
NPS vatsalya documents
Following documents are needed for the NPS vatsalya account;
- Proof of Date of Birth: Acceptable documents include the minor’s birth certificate, PAN card, matriculation certificate, school leaver certificate, and passport.
- KYC for Guardian: The guardian needs to provide documentation of their identity and address, like their Aadhaar card, passport, driver’s license, voter ID card, or NREGA job card.
- Contents of a Non-Resident External (NRE) or Non-Resident Ordinary (NRO) bank account kept expressly for the minor (either solo or joint) must be provided if the guardian is an NRI.
- Scanned copies for OCI and NRI subscribers: These customers must submit scanned copies of their bank statement, passport, and evidence of foreign address.
NPS Vatsalya withdrawal rules
Partial withdrawal is permitted under the NPS Vatsalya Scheme before the kid turns 18.
Before 18 years of age
The following criteria must be met in order to partially withdraw funds from an NPS Vatsalya account:
- Three years after registering with NPS, parents or guardians may withdraw.
- Up to 25% of the money they gave may be taken out. Only three withdrawals are possible before the youngster turns eighteen.
- According to the PFRDA, they may withdraw for the following reasons: education; a disability of more than 75%; the treatment of certain illnesses; etc.The NPS Vatsalya Scheme can be transformed into a conventional NPS account that the kid can handle on their own once they reach the age of majority (18 years). But, the minor subscriber needs to complete a new KYC within three months of being eighteen.The NPS Vatsalya amount’s accrued contribution amount will be moved to the regular NPS account. When the child reaches the age of majority, they have the option to withdraw from the NPS Vatsalya account rather than switching it to a regular NPS account.
After 18 years of age
The requirements to withdraw the balance from your NPS Vatsalya account after you leave are as follows:
- Twenty percent of the total corpus can be withdrawn as a lump amount, with the remaining eighty percent to be reinvested in an annuity plan.
- The whole money can be withdrawn in one lump sum if the total corpus is less than Rs. 2.5 lakh.
In case of any misfortune event
The following are the NPS Vatsalya Scheme guidelines in the event of an unfortunate death:
The subscriber’s (little child’s) death: The candidate, who is the guardian, will receive the entire corpus back.
Guardian’s death: A new KYC should be used to register a guardian under the program.
Both parents’ deaths: The child’s legal guardian may keep the program going without contributing until the child turns 18 years old.
NPS Vatsalya benefits
There are the following benefits of NPS vatsalya scheme;
- The NPS Vatsalya Scheme will encourage children to save. They can thus independently maintain it and add to the account.
- The NPS program provides portability. It meant that a person’s NPS account is unaffected by changing jobs.
- When a kid reaches majority, their NPS Vatsalya account can be converted to an NPS account.
- It can be maintained throughout the child’s lifetime and serve as a solid retirement fund.
- Because payments to the NPS Vatsalya account start when the child is still a minor, it’s a good alternative for retirement savings. Thus, when the child retires, a sizable sum will have accumulated.
- The NPS Vatsalya account can be changed into a regular NPS account after the child reaches major. Because the child must contribute 40% of the total NPS amount to an annuity plan, when the child grows up and reaches retirement age, he or she can get good returns to live a pleasant retirement.
- The advantage of having a sizable corpus at retirement is that the NPS Vatsalya account is started when the child is still a minor.
- In order to receive good returns, this also encourages youngsters to start saving early in life and emphasizes the need of early savings habits.
- From a young age, children are taught good financial management through the NPS Vatsalya Scheme.
- Because the NPS Vatsalya account is turned into a regular NPS account at the age of 18. It allows the child to begin making independent contributions, it encourages savings habits that they can carry into adulthood.
- NPS Vatsalya provides families with a methodical way to guarantee the financial stability of their offspring in the future.
- A useful tool for ensuring a child’s financial security and building a retirement corpus is the NPS Vatsalya Scheme.
FAQs
Is NPS risk free?
Ans. No it is not completely risk free because it is a market linked scheme.
Is NPS tax free on maturity?
Ans. The government did not clarify anything related to tax benefits.
