What is NPS Vatsalya Scheme?

About NPS Vatsalya Scheme:

• It is a scheme under the National Pension Scheme (NPS).
• It is designed to help parents and guardians plan for their children's future financial needs.
• Under this scheme, parents or guardians can open an account for their minor children and make contributions towards their retirement savings.
  • The funds will accumulate until the child turns 18.
  • Once the child reaches adulthood, the accumulated amount will be transferred to the standard NPS account. 
  • This plan could be seamlessly converted into a non-NPS planwhen the child becomes an adult.
• The scheme operates similarly to the existing NPS.

Key Facts about NPS:

• It is a voluntary retirement benefit scheme introduced by the Government of India to facilitate regular income post-retirement for all subscribers. 
• A citizen of India, either a resident, non-resident, or an Overseas Citizen of India, can open an NPS account. 
• It helps individuals build a retirement corpus by making regular contributions throughout their careers.
• NPS contributions are invested in market-linked instruments such as stocks and bonds, providing the potential for higher returns compared to traditional fixed-income options.
• Subscribers also have the option to exit this plan before retirement or opt for superannuation. 
• It is based on a unique Permanent Retirement Account Number (PRAN), which is allotted to every subscriber.
  • NPS account or PRAN will remain the sameirrespective of changes in employment,city, or state. It can be used from any location in India.
• PFRDA (Pension Fund Regulatory and Development Authority) is the governing body for NPS.
• Contributions to the NPS are eligible for tax deductions under Section 80C and an additional deduction of up to ₹50,000 under Section 80CCD(1B).

Q1: What is Pension Fund Regulatory and Development Authority (PFRDA)?

It is a statutory regulatory body set up under the PFRDA Act enacted in 2014, to promote old age income security by establishing, developing, and regulating pension funds and to protect the interests of subscribers to schemes of pension funds and related matters. It comes under the jurisdiction of the Ministry of Finance. PFRDA is headquartered in New Delhi, with regional offices located around the country.

Source: Union Budget 2024: Govt introduces pension scheme for minor children. Know what is NPS Vatsalya