NPS Vatsalya Scheme: Key Features & Benefits

Planning early is one of the best ways to support your child’s future goals—be it education, career, or financial independence. NPS Vatsalya is a long-term pension scheme specially for minors in which parents or guardians invest on behalf of their child. It helps build a long-term financial cushion for the child until they are ready to manage their own investments.

This blog will guide you through how to open an NPS Vatsalya account and how it works. You'll also learn about its investment choices, withdrawal rules, and what happens when the child turns 18.

What is NPS Vatsalya?

The government designed NPS Vatsalya for minors in India, which can help the parents to secure their child’s financial future. The account is managed by the parent until the minor reaches 18 years of age. The account is overseen by the Pension Fund Regulatory and Development Authority (PFRDA) and helps to build a strong financial base for your child, right from the beginning. 

How Does the NPS Vatsalya Scheme Work?

NPS Vatsalya Scheme is pretty easy and simple to navigate. Guardians or parents can easily create an NPS account for their children and contribute to that account till the child reaches 18 years of age. 

• The contribution starts with a minimum amount of Rs. 1000 per year and there is no upper limit.
• All these contributions get funded through all the market-associated options, which will allow the funds to continue growing over time.
• The guardian can choose from any of the funds registered with PFRDA for investment and choose from Moderate, Active choice or Auto choice of investment.

When the child turns 18, the account will then transform automatically into a normal NPS account. This will let the child take charge of their savings for retirement days. The child can also make contributions to the NPS account independently and will also get the option to use the funds to buy an annuity for periodic income after they retire or cash out the funds completely.

Starting retirement planning for minors during the early phase and saving funds consistently will offer children a powerful monetary foundation. In return, it will allow them to concentrate on their life goals and careers without worrying about their monetary situation later on.

Why Join NPS Vatsalya?

• Provides children with a safe way to save for retirement.
• Helps children have a stable financial future.
• Provides tax advantages under Section 80C and Section 80CCD (1B).
• Low minimum contributions and a variety of investment possibilities.
• A government-sponsored program that assures the security of funds.

Key Features of the NPS Vatsalya Scheme

The NPS Vatsalya Scheme offers a range of benefits designed to secure your child’s financial future. Here’s an overview of its key features:

• Long-term financial security - The NPS Vatsalya scheme assists you in building a strong base for your child so that they can be financially secure in the future.

• Market-linked investments - This is a market-linked scheme, which means it invests in equity and debt funds, which can potentially offer higher returns than traditional fixed-income options.

• Reliable retirement corpus - It is a reliable form of investing and helps to create a strong retirement fund for minors.

• Financial education for children - At age 18, the account can be directly converted into a regular NPS account. This in turn promotes financial responsibility and retirement planning skills.

• Flexible contribution options - As parents, you can choose to contribute lump sums or regular amounts, all according to your financial situation.

• Encourages disciplined saving - The scheme also encourages a consistent contribution to support systematic financial planning over the long term.

• Choice of payout - When the child turns 18, they can opt for either periodic pension payments or a lump sum hdrawal.

• Life insurance coverage - The scheme includes life insurance for the guardian, ensuring financial protection for the family during the contribution period.

This comprehensive approach ensures that the NPS Vatsalya Scheme is a valuable tool for securing your child's financial future while encouraging responsible financial planning.

How to Open NPS Vatsalya Account

 Online Process

1. Visit the official eNPS portal and click on ‘Apply Online’ and select your preferred Central Recordkeeping Agency (CRA) — CAMS, KFin Technologies, or Protean.

2. Fill in the minor’s and guardian’s details as prompted.

3. If you select Protean, ensure you choose ‘Applicant Type – NPS Vatsalya’ to open the account correctly.

4. Upload required KYC documents and make the initial contribution (minimum ₹1,000).

Offline Process with ICICI Bank

• Visit a Point of Presence (PoP) Service Provider

• Collect the NPS Vatsalya application form and submit it along with the necessary KYC documents and initial contribution.

• Bank officials will assist in completing the application.

• The account will be opened after verification, and PRAN will be issued.

Eligibility Criteria for the NPS Vatsalya Scheme

Right before you apply for the NPS Vatsalya Yojana, you should know about the eligibility requirements:

• Minor: All minor citizens age till 18 years.
• Parents and Guardians: The NPS Vatsalya account should be created by a legal guardian or a parent on behalf of the minor child. 

Documents required for the NPS Vatsalya Scheme

Getting the NPS Vatsalya account set up for your children requires the following documents:

1. Identity and Address Proof of the Parent/Guardian for KYC. Any of the documents like Aadhaar, Driving License, Passport, Voter ID card, NREGA Job Card, National Population Register can be submitted.
2. The document proof of Date of Birth of the Minor. Any of the documents from Birth certificate, School leaving certificate, Highschool Certificate, PAN or Passport can be submitted.
3. If the guardian is NRI then the NRE/NRO Bank Account (solo or joint) of the minor is required.

NPS Vatsalya Scheme – Investment Choices

• Investments are market-linked, diversified across equity, corporate bonds, and government securities.

• Subscribers can choose between:

  • Active Choice: Self-select asset allocation percentages.

  • Auto Choice: Lifecycle-based allocation (LC-75, LC-50, LC-25) that automatically adjusts asset mix as the minor ages.

NPS Vatsalya Scheme Contribution

• Parents or guardians can contribute via lump sums or periodic payments without an upper limit.

• Minimum initial contribution is ₹1,000 and maximum no limit.

• Contributions help build a retirement corpus for the minor.

NPS Vatsalya Scheme - Conversion to Regular NPS

Conversion to Regular NPS Account

• On the minor’s 18th birthday, the NPS Vatsalya account automatically converts to a regular NPS Tier 1 account.

• The subscriber must complete fresh KYC within 3 months of turning 18.

• After conversion, all regular NPS rules, benefits, and exit options apply.

NPS Vatsalya Withdrawal Rules  

NPS Vatsalya Exit Rules

At 18 years:

• If corpus is ₹2.5 lakh or more, at least 80% must be used to purchase an annuity, and up to 20% can be withdrawn as a lump sum.

• If corpus is less than ₹2.5 lakh, a full lump sum withdrawal is allowed.

On death:

• If the minor dies, the entire corpus is paid to the guardian.

• If the guardian dies, another guardian can be registered after completing fresh KYC.

Conclusion

The NPS Vatsalya Yojana is an outstanding approach constructed by the Indian government to assist all parents in securing the monetary future of their children. The scheme will let them do so by saving funds for their retirement days. It comes with long-lasting growth potential, flexible structure, and tax benefits, making it an ideal option for parents and allowing them to create a strong monetary foundation for their youngsters. For all parents/legal guardians who aim to make proper plans for their child's future, the NPS Vatsalya Yojana stands out as a smart and perfect option. By making contributions periodically, you can assemble a retirement fund for the child and also instruct them on the value of monetary planning from a young age.

To Apply, Visit Nearest Branch

FAQs

Can NRIs or OCIs open an NPS Vatsalya account?

Yes. Indian citizens, NRIs, and OCIs can open and manage an NPS Vatsalya account on behalf of a minor.

Can a guardian who is already an NPS subscriber open an NPS Vatsalya account for a minor?

Yes, a guardian who is an NPS subscriber can open and manage an NPS Vatsalya account for the minor.

What happens if the minor dies before turning 18?

The entire accumulated corpus is paid to the guardian. If the guardian dies, a new guardian can be registered after completing fresh KYC.