NPS Vatsalya Scheme: Invest for your child's future

Finance Minister Nirmala Sitharaman announced a new scheme in the July 2024 budget. This scheme was designed and introduced as a pension scheme for children under NPS. It is called the NPS Vatsalya Yojana scheme. This scheme came into effect from September 18. Any minor below 18 years of age can join this scheme under the NPS Vatsalya scheme. Investments can be made in the name of the child by their parents or guardian.

NPS Vatsalya Yojana is a scheme that helps parents save for their children's future through a pension account. By investing for the long term, you can reap the benefits of compound interest. To join the NPS Vatsalya scheme, you need to deposit a minimum of Rs.1000. You can pay any amount above that.

Any minor below 18 years of age with PAN and Aadhaar card can open this account. Under this scheme, you have to invest a minimum of Rs. 1000 per year. You can deposit any amount above that. Since children usually do not earn at that age, their parents can invest on their behalf. Once the child turns 18, this account will be converted into a regular NPS account. Then there will be a lock-in period of 3 years. After that you can withdraw 25% of the amount 3 times.

Through this scheme, if you can deposit more than Rs 2.5 lakh per annum in your child's name, you can take 80% of it for your needs. 20% of the total amount can be withdrawn at once. In case of death, the entire amount is transferred to the guardian's name. For example, let's assume that you are depositing Rs 10,000 per year for 18 years under the NPS Vatsalya Yojana. NPS earns 14% under equity, 9.1% under corporate debt, and 8.8% through government securities. Thus, after 18 years, the total investment will be Rs 5 lakh. It earns 10% profit per annum.

If this amount is kept for 60 years, the total corpus will be Rs.2.75 crores including 10% annual return. If the annual return is 11.59% due to the financial conditions at that time, this corpus will be Rs.5.97 crores at the age of 60 years. Similarly, based on 12.86% annual return, the total corpus will be Rs.11.05 crores at the age of 60 years. This means that by the time your children achieve their goals in life and relax, they will simply get Rs. Crores.

Child's birth certificate, school transfer certificate, matriculation certificate, PAN, passport should be submitted. Apart from these, the guardian should have KYC identification, address proof (Aadhaar, Driving License, Passport, Voter ID card, 100 days scheme ID card and National Population Register). If NRI, must have NRE/NRO bank account.