Securing the future of children is a top priority for parents, especially with the continuous rise in education costs. To help parents build a disciplined saving habit, the Indian government introduced the NPS Vatsalya scheme, which now offers tax benefits under the Income-Tax Act, of 1961. In the Union Budget 2025, Finance Minister Nirmala Sitharaman announced a tax benefit for parents and guardians who are contributing to the NPS Vatsalya scheme.
What is NPS Vatsalya?
Launched in 2024, NPS Vatsalya is a savings-cum-pension scheme regulated by the Pension Fund Regulatory Authority of India (PFRDA). This contributory scheme allows parents and guardians to save money for their minor child until they turn 18 years old. Under the NPS Vatsalya scheme, parents can invest a minimum of Rs 1,000 per year, with no upper limit. It helps parents to develop a habit of disciplined savings for their children so the money can be utilised for their education in the future.
How NPS Vatsalya Helps in Tax Benefits?
Nirmala Sitharaman, the finance minister of India, announced in the Union Budget 2025 a tax benefit for parents and guardians who are contributing to the NPS Vatsalya scheme. The benefit will be available under the old tax regime. Parents and guardians can claim a tax benefit of up to Rs 50,000 under Section 80CCD (1B) of the Income-Tax Act, 1961, on contributions made to their minor child’s NPS Vatsalya account.
Previously, this tax benefit was only available for those contributing to NPS Tier-1 accounts. Now, parents investing in NPS Vatsalya can also claim deductions, providing additional savings opportunities.
With the recent tax incentives and increased awareness, participation in the NPS Vatsalya program is expected to rise, securing the financial futures of children across India.
How to Open an NPS Vatsalya Account for Your Child?
To open an NPS account, you will need to visit your nearest Point of Presence (PoP), which assists in registering your NPS application.
Here are the steps for registration –
Step 1: Find Your Nearest UTI Pension Limited PoP- Locate the nearest Point of Presence.
Step 2: Visit the PoP- Go to the PoP and fill out the application form.
Step 3: Complete KYC Requirements- Submit the necessary documents to fulfill the KYC norms.
Step 4: Make the Payment- Pay a minimum of ₹500 for a Tier I account.
Step 5: Submit the Application- Hand in your completed application form.
You should receive your PRAN kit via post, which may take more than 10 days to arrive.
The account is established in the child’s name and is overseen by the guardian until the child reaches 18 years of age, safeguarding their financial security and stability for the future.
Why Choose NPS Vatsalya?
With rising education costs, NPS Vatsalya serves as a long-term investment plan, helping parents save systematically while also enjoying tax benefits. The scheme not only promotes financial discipline but also ensures that children have a secure financial cushion for higher education and other future needs.