How NPS Vatsalya Yojana helps parents build a Rs 11 crore fund for their kids?

Finance Minister Nirmala Sitharaman announced a new scheme in the July 2024 budget. This scheme is designed as a pension scheme for children under NPS. It's called the NPS Vatsalya Yojana scheme. This scheme came into effect from September 18. Any minor below 18 years can join. Parents or guardians can invest on behalf of the child.

What is NPS Vatsalya Yojana?

NPS Vatsalya Yojana helps parents save for their children's future through a pension account, leveraging long-term compound interest. The minimum deposit is Rs. 1000, with no maximum limit.

Any minor under 18 with PAN and Aadhaar can open an account. Invest a minimum of Rs. 1000 annually. Parents can invest on behalf of their children. At 18, the account converts to a regular NPS account with a 3-year lock-in. Withdraw 25% thrice after that.

Depositing over Rs. 2.5 lakhs annually allows you to withdraw 80% for your needs and 20% lump-sum. The full amount transfers to the guardian upon death. Investing Rs. 10,000 annually for 18 years at 10% annual return yields Rs. 5 lakhs.

Holding the investment for 60 years at 10% annual return results in Rs. 2.75 crores. At 11.59%, it becomes Rs. 5.97 crores, and at 12.86%, it reaches Rs. 11.05 crores by age 60.

What documents are required?

Submit child's birth certificate, school transfer/matriculation certificate, PAN, passport. Guardian needs KYC, address proof (Aadhaar, driving license, passport, voter ID, NREGA card). NRIs need NRE/NRO account.