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NPS Vatsalya Plan: Now parents and guardians can invest in pension scheme for their children. In the budget, Modi government has launched NPS pension scheme for children 'NPS Vatsalya'. To make the new pension scheme more attractive, in line with the new tax regime, Finance Minister Nirmala Sitharaman has proposed to increase the limit of employer's contribution from 10 percent to 14 percent, besides introducing parent and guardian contribution scheme for minor children, NPS-Vatsalya.
What is NPS- Vatsalya Scheme?
NPS Vatsalya Yojana is a new pension scheme launched in the Union Budget 2024 of India. Parents and guardians can avail this scheme as part of their children's retirement savings. In which if the children become senior, then this savings will be transferred to the NPS account. Information about the scheme such as eligibility, investment limit, investment options and tax benefits have not been released yet. However, experts believe that this scheme will promote responsible financial planning while providing financial security after retirement.
A new plan for the future of children
Under the NPS Vatsalya scheme, parents and guardians can open an account in the name of their children. Regular contributions have to be made in this account. When the child becomes an adult, this account will be converted into a normal account of NPS. So this child can avail the benefit of long-term savings plan for retirement.
Investment and Withdrawal Rules
If parents want to save for their child's higher education and marriage then this NPS Vatsalya scheme is not suitable for them. 25 per cent of the amount can be withdrawn after three years of opening the NPS account. While after five years, 20 per cent of the amount can be withdrawn tax free. It is mandatory to invest the remaining amount as annuity. If a user spends Rs. 10000 invested for 10 years, then after 10 years Rs. 3 lakh can be partially withdrawn. However, this amount will not be sufficient to meet the higher education needs of the children.
Announcement of NPS in Budget 2024
In the Union Budget 2024-25, Sitharaman said that to improve the social security benefits in NPS, it is proposed to increase the allocation limit by the employer to the NPS account of employees from 10 per cent to 14 per cent. There is a provision to allocate 14 per cent of the salary of employees under NPS in private and public sector banks adopting the new tax regime.