National Pension System Vatsalya (NPSV)

NPS Vatsalya is an innovative pension scheme under the National Pension System (NPS), designed specifically for minors. Its primary aim is to foster a pensioned society by encouraging early savings for retirement. Managed and regulated by the Pension Fund Regulatory and Development Authority (PFRDA), the scheme allows parents or guardians to open and operate an account for a minor, which seamlessly transitions into a regular NPS Tier-I account once the child turns 18. Contributions to NPS Vatsalya also offer tax benefits under Section 80CCD(1B).

Eligibility: Who Can Open an NPS Vatsalya Account?

• Open to all Indian citizens below 18 years of age (minors).

• The account must be opened by a natural or legal guardian, who can be a resident Indian, Non-Resident Indian (NRI), or Overseas Citizen of India (OCI).

• Only one NPS Vatsalya account is allowed per child, and the minor is the sole beneficiary

How to Open an NPS Vatsalya Account

Modes of Account Opening:

• Through Points of Presence (POPs) such as major banks, India Post, or Pension Funds—either online or in person.

• Via the NPS Trust’s online platform (eNPS).

Required Documents:

• Proof of the minor’s date of birth (Birth certificate, PAN, Passport, or School certificate).

• Parent/guardian’s identity and address proof (KYC as per PFRDA guidelines).

• For legal guardians, a court order of appointment and KYC documents.

• Minor’s bank account details (mandatory for NRIs/OCIs; optional for residents at the time of opening

Contributions and Tax Benefits

Minimum Contribution: ₹1,000 per annum; no maximum limit.

Initial Contribution: ₹1,000 required at the time of enrollment.

Modes of Payment: Physical (at POPs) or online (through POPs or eNPS platform).

Account Status: Accounts are marked as ‘frozen’ if the minimum contribution is not made in a year but can be reactivated with a new contribution.

Tax Deduction: Contributions qualify for deduction under Section 80CCD(1B), up to ₹50,000 per annum for the parent/guardian.

What Happens When the Minor Turns 18?

When the minor reaches 18 years, the NPS Vatsalya account is automatically converted into an NPS Tier-I account under the All-Citizen Model. The subscriber must submit fresh KYC documents within three months of attaining majority to continue making contributions. From this point, all features and exit norms of the regular NPS Tier-I account apply.

Withdrawal and Exit Rules

Partial Withdrawals :Permitted only for the following purposes:

·        Education of the minor subscriber

·        Treatment of specified illnesses

·        75% or more disability of the minor

Up to 25% of contributions (excluding investment returns) can be withdrawn, tax-free under Section 10(12BA), after a minimum of three years from account opening. This can be done a maximum of three times before the subscriber turns 18.

Exit from NPS Vatsalya:

·        Allowed only after the subscriber turns 18.

·        Upon exit between ages 18 and 60: At least 80% of the corpus must be used to purchase an annuity, with the remainder paid as a lump sum. If the corpus is ₹2.5 lakh or less, the entire amount can be withdrawn.

·        Upon exit at or after 60: If the corpus is ₹5 lakh or less, the entire amount can be withdrawn; otherwise, at least 40% must be used for an annuity, and the rest paid as a lump sum.

In Case of Death

• If the Minor Passes Away: The entire accumulated corpus is paid to the guardian.

• If the Guardian Passes Away: Another guardian must be registered with the required KYC documents.

• If Both Parents Die: A legally appointed guardian can continue the account, with or without contributions, until the minor turns 18. Afterward, the subscriber can choose to exit or continue the scheme.

Conclusion

NPS Vatsalya offers a structured way for parents and guardians to secure their children’s financial future by instilling the habit of long-term savings from an early age. With flexible investment options, tax benefits, and robust regulatory oversight, it is a valuable addition to any family’s financial planning toolkit

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