Planning for your child’s future is a top priority for every parent. Education, healthcare, and other life milestones require significant financial resources. The NPS Vatsalya Scheme, launched on September 18, 2024, offers a smart way to build a financial safety net for your minor child. And now, it’s even more attractive thanks to new tax benefits!  

What is NPS Vatsalya?

NPS Vatsalya is a special National Pension Scheme (NPS) account designed specifically for minor children. As a parent or guardian, you can open and manage this account on behalf of your child until they turn 18. The accumulated funds grow over time, providing a substantial corpus when your child reaches adulthood. Upon turning 18, the account seamlessly transitions to your child, either within a Tier 1 NPS account or another designated account, empowering them to take control of their financial future.  

Tax Advantages: A Boost for Your Savings

The government recognizes the importance of long-term savings and has introduced significant tax incentives for contributions made to NPS Vatsalya accounts, effective from April 1, 2026 (Assessment Year 2026-27). These tax benefits make the scheme even more appealing for parents looking to maximize their savings:  

• Deductible Contributions: You can now claim a deduction of up to ₹50,000 for contributions made to your minor child’s NPS Vatsalya account under Section 80CCD(1B) of the Income Tax Act. This can significantly reduce your taxable income.  
• Tax on Withdrawal (Later): While contributions are tax-deductible, it’s important to note that the amount you claimed as a deduction, along with any earnings accrued, will be subject to tax when withdrawn from the account. This is a standard practice for tax-deferred investments.
• Protection in Case of Misfortune: In the unfortunate event of your child’s passing, the funds received from the closed NPS Vatsalya account will not be considered part of your taxable income.
• Flexibility for Essential Needs: Life can be unpredictable. That’s why the NPS Vatsalya scheme allows for partial withdrawals to cover critical expenses like education or medical treatment (under Section 10(12BA)). Importantly, income from these partial withdrawals, up to 25% of your total contributions (as per regulations), will not be added to your income for tax purposes. This provides a crucial safety net without compromising the long-term savings goal.  

Why Choose NPS Vatsalya?

• Long-Term Growth: NPS is a well-established retirement savings scheme with a proven track record of generating returns. This allows you to harness this potential for your child’s future.  
• Disciplined Savings: The scheme encourages disciplined savings habits, ensuring a steady accumulation of funds over time.  
• Professional Management: The funds are managed by professional fund managers, maximizing the potential for growth.  
• Tax Benefits: The newly introduced tax benefits make NPS Vatsalya an even more attractive investment option.  

Investing in Your Child’s Dreams

NPS Vatsalya, combined with these new tax advantages, offers a powerful tool for securing your child’s financial future.

Whether it’s for higher education, a down payment on a house, or starting a business, NPS Vatsalya can help turn their dreams into reality. Start planning today and give your child the gift of financial security. 

Get in touch with Pitchers Global today!