The Finance Minister, Nirmala Sitharaman announces a new scheme NPS Vatsalya Yojana in the Union Budget 2024. The scheme allows parents to plan and contribute to the pensions of their children. The article covers everything you wish to learn about the Vatsalya Yojana.
Vatsalya Yojana
On 23 July 2024, the Finance Minister of India, Nirmala Sithraman presented the Union Budget for the fiscal year 2024-25 in the Lok Sabha, where the FM announced a NPS scheme for minors and called it NPS Vatsalya. The Vatsalya Yojana is a variant of the NPS adult scheme tailored for children.
The NPS (National Pension Scheme) allows individuals to have the income to manage their expenses after retirement. Under the Vatsalya scheme, the parents and guardians can plan & contribute to the pension plans for their children and secure their future.
According to the announcement, parents and guardians will open an NPS account for their children and they will be responsible for a certain amount of contribution to the NPS Vatsalya on behalf of their children. The NPS Vatsalya account will be converted to a normal NPS account when the child reaches 18 years of age and can handle the account independently.
Vatsalya Yojana Eligibility Criteria
According to the FM budget 2024 speech, there are no certain criteria for the Vatsalya Yojana, all Indian citizens, OCIs, and NRIs with a responsibility of child can open a Vatsalya account for their children and start contributing a certain amount regularly towards their future retirement planning.
The parents can open a Valstalya account from the early age of their child under the scheme. The government will soon release a detailed description of the scheme, so the parents and guardians can get a clear picture of contributions to see if they should go for the scheme or not while managing the expenses of raising a child.
Tax and Other Benefits on Vatsalya Yojana
The NPS Vatsalya scheme offers the following benefits to the citizens:
- The NPS Vatsalya scheme is similar to the current NPS scheme for individuals, so parents or guardians can expect some tax benefits or tax reliefs on the scheme. In the budget 2024, the NPS contribution limit is raised for employers from 10% to 14% of the employee’s pay slip.
- The NPS Vatsalya account transitioned to the NPS regular account offers a seamless transition to an adult pension account, eventually promoting early retirement planning among the children.
- As the parents or guardians will contribute to the NPS Vatsalya, the child will have a large sum amount at the time of retirement to cover their expenses and live a good life. According to reports, the child can take 60% of the funds in the NPA account, and the rest 40% can be allocated to the annuity plan to lead a comfortable life after retirement.
- The scheme promotes the early habit of financial management and saving money, which provides financial stability and security. The children will begin investing from early adulthood and will be more active in financial planning.
- The NPS Vatsalya is a great option for parents to lay the foundation for developing a surplus amount for retirement funds ensuring children’s financial security.
How to apply for the Vatsalya Yojana?
The parents or guardians can apply for the NPS Vatsalya soon when the government announces detailed instructions and information about the scheme. The Central government hasn’t revealed anything about how the parents or guardians can avail of Vatslaya Yojana.
However, as the Vatsalya scheme is similar to the regular NPS scheme, many experts believe that the central government will open the NPS Vatsalya application on the official website. The parents or guardians may connect their bank account to automatically contribute to their Children’s NPS Vatsalya account for retirement funds.
The NPS Vatsalya is a unique initiative that allows parents to develop a retirement plan for their children from an early age and promotes early retirement planning among children when they reach adulthood. The most challenging part of the NPS Vatsalya scheme is how the parents will be able to contribute to the scheme with high expenses and their retirement plans. The tax relief and benefits can attract many taxpayers to this scheme.
So, it would be interesting to see what parents take on the NPS Vatsalya scheme with the increasing cost of child education and other expenses.
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