The “NPS Vatsalya Scheme” was announced by the Hon’ble Finance Minister in the Union Budget for FY 2024-25. This scheme allows parents or guardians to open an NPS account on behalf of a minor, with contributions made either monthly or annually until the child attains 18 years. The objective is to build a retirement corpus for the minor, which, upon attaining the age of majority, seamlessly converts into a regular NPS Tier-I account after fresh KYC verification.
Key Features
- Account Opening & Contribution:
- Minimum Contribution: ₹1,000 per year.
- No Maximum Contribution: Parents can contribute any amount beyond the minimum, with no upper limit.
- Investment Choices:
- Default Choice: Moderate Lifecycle Fund – LC-50 (50% equity).
- Auto Choice: Options include Aggressive Lifecycle Fund – LC-75 (75% equity), Moderate Lifecycle Fund – LC-50 (50% equity), or Conservative Lifecycle Fund – LC-25 (25% equity).
- Active Choice: Parents can actively determine the allocation among equity (up to 75%), government securities (up to 100%), corporate debt (up to 100%), and alternate assets (up to 5%).
- Upon Attainment of 18 Years:
- Seamless shift to an NPS Tier-I account with fresh KYC completion within three months.
- Exit & Withdrawal Provisions:
- Partial Withdrawal: For education, treatment of specified illnesses, disability above 75%, or other reasons as specified by PFRDA, the guardian can withdraw up to 25% of the contributions (excluding returns) after a minimum period of 3 years from account opening. This withdrawal can be made up to three times until the minor reaches 18 years.
- In Case of Death:
- If the minor subscriber dies, the entire accumulated pension wealth is paid to the guardian.
- If the guardian dies, a new guardian can be registered upon submission of the required KYC documents.
- At Exit:
- When the subscriber turns 18, they have the option to exit the scheme. At least 80% of the accumulated pension wealth must be used to purchase an annuity, with any remaining balance paid as a lump sum. If the accumulated wealth is ₹2,50,000 or less, or if annuity purchase is not available from empanelled Annuity Service Providers, the entire amount can be withdrawn.
Benefits
- Provides a head start for retirement savings and instills the importance of financial planning from an early age.
- Ensures continuity of investment with a seamless transition to a regular NPS account upon reaching 18 years.
- Offers flexible withdrawal options for critical needs such as education and medical treatment.
- Helps in building a substantial corpus over time without a cap on contributions.
Eligibility
- For the Minor:
- Any minor who is a citizen of India is eligible until the age of 18.
- Account Operation:
- The account must be opened by a natural or legal guardian in the minor’s name, who will operate the account exclusively for the benefit of the minor.
- Additional Requirements:
- If the guardian is court-appointed, a copy of the court order confirming guardianship must be submitted along with the KYC documents.
- The guardian must adhere to KYC norms as per the guidelines set by the Pension Fund Regulatory and Development Authority (PFRDA).
Application Process
Online / Offline
- Step 1:
Visit the NPS Trust Website at https://npstrust.org.in and click on “Open NPS Vatsalya”. - Step 2:
Choose one of the three CRAs (Central Recordkeeping Agencies) available. - Step 3:
Enter the basic details of the minor and the guardian. Complete the OTP authentication process. - Step 4:
The guardian’s KYC details (Name, Date of Birth, Gender, Address, and Photo) will be auto-fetched from UIDAI/CERSAI. Upload proof of the minor’s date of birth. - Step 5:
Enter FATCA details and declarations, and select your preferred investment option. - Step 6:
Verify all details via OTP sent to your email and mobile number. - Step 7:
Make the initial contribution of at least ₹1,000. - Step 8:
Upon successful payment, a Permanent Retirement Account Number (PRAN) will be generated for the account.
Documents Required
- For the Guardian:
- Aadhaar Card, PAN Card, or Driving License.
- For the Minor:
- Proof of Date of Birth (e.g., Birth Certificate, School Leaving Certificate/Marksheet, Passport).
- Additional:
- Guardian’s signature.
- For NRI/OCI subscribers: Scanned copies of passport, foreign address proof, and bank proof as applicable.
Frequently Asked Questions
-
What is NPS Vatsalya?
It is a scheme that enables parents/guardians to open an NPS account for minors to save for retirement, which converts into a regular NPS Tier-I account when the minor reaches 18 years. -
Who can subscribe to NPS Vatsalya?
Any Indian minor is eligible, with the account opened by their natural or legal guardian. -
What are the benefits of opening an NPS Vatsalya account?
It provides a head start on retirement savings, instills financial discipline, and offers flexible contribution and withdrawal options. -
How is the NPS Vatsalya account operated?
The account is managed by the guardian until the minor turns 18, after which it transitions to a regular NPS Tier-I account upon completion of fresh KYC. -
What is the procedure for opening an NPS Vatsalya account?
Visit the NPS Trust website, select “Open NPS Vatsalya,” fill in the required details, complete KYC and OTP verification, and make an initial contribution. -
What are the KYC requirements?
The guardian must provide valid documents such as Aadhaar, PAN, or Driving License, and the minor’s date of birth proof must be uploaded. -
What happens when the minor attains the age of 18?
The account is seamlessly shifted to an NPS Tier-I account after fresh KYC, allowing the subscriber to choose whether to continue or exit the scheme. -
Can an NRI or OCI open an NPS Vatsalya account?
Yes, subject to providing the requisite documentation (e.g., passport, foreign address proof, bank proof). -
Is a bank account required for opening an NPS Vatsalya account?
Yes, contributions are made through the bank account linked to the guardian. -
What are the minimum and maximum contributions for the accumulation phase?
The minimum contribution is ₹1,000 per year, and there is no maximum limit. -
Can I partially withdraw money from the NPS Vatsalya account before 18 years?
Yes, up to 25% of the contributions (excluding returns) can be withdrawn on a declaration basis after 3 years, for a maximum of three times before the minor turns 18. -
What are the exit options under the scheme?
On reaching 18, at least 80% of the accumulated pension wealth must be used to purchase an annuity, with the remaining amount available as a lump sum, subject to PFRDA regulations. -
What happens in case of the death of the minor before 18?
The entire accumulated pension wealth is paid to the guardian. -
Whom should I approach if I have a complaint or grievance?
Grievances can be directed to the designated authorities as specified by the NPS Trust and PFRDA.