NPS Vatsalya scheme pension plan for kids (under 18 years old).
What is NPS Vatsalya?
- It’s a new pension plan specifically for kids (under 18 years old).
- The idea is to start saving for retirement early.
- Parents or guardians manage the account for the child.
- It was launched in September 2024, and many accounts have already been opened.
Key Features:
- Early Start: Kids can now have a pension account, which wasn’t possible before.
- Flexible Contributions:
- You can start with as little as ₹1,000 per year.
- There’s no limit on how much you can put in.
- You can choose where the money is invested (government bonds, company debt, stocks).
- Partial Withdrawals:
- After 3 years, you can take out up to 25% of the money.
- This is for things like higher education, medical emergencies, or disability.
- You can take these partial withdrawals a maximum of three times.
- Protection:
- If the child dies, the money goes back to the guardian.
- If the guardian dies, a new one can be appointed.
- If both parents die, the new appointed guardian can continue the account, or the child can exit the scheme when they turn 18.
- Turning 18:
- The child can switch to a regular adult NPS account.
- Or, they can take out the money, with some rules about buying an annuity (a regular income stream).
Why It Matters:
- It encourages kids to think about saving for the future.
- It helps build a habit of financial responsibility.
- It provides money for important needs like education and healthcare.
Tax Benefits (Starting April 2026):
- Parents/guardians can get tax deductions for contributions (up to ₹50,000, under the old tax regime).
- Rules about taxes on withdrawals at age 18 are defined.
- If the child passes away, the money is not taxed.
- Partial withdrawals are tax free.
In Simple Words:
Think of NPS Vatsalya as a piggy bank for your child’s future. It’s a way to start saving early for their retirement and other important life events, with some tax benefits to help you along the way.