NPS Vatsalya Scheme for minors was introduced during the Budget 2024. What is NPS Vatsalya Scheme? What are the tax benefits of the NPS Vatsalya Scheme?
“I want to leave my children enough so that they can do anything, but not so much that they can do nothing.” – Warren Buffett
The above quote of Warren Buffet gives us lot of thoughts on how much we have to accumulate for our kids.
Please be reminded that the NPS Vatsalya Scheme was introduced in the Budget speech of 2024. At present, the full specifics of the NPS Vatsalya Scheme have not been disclosed. Nevertheless, one can infer based on the existing information. Therefore, I decided to compose this article.
What is NPS Vatsalya Scheme?
During her Budget 2024 speech, Finance Minister Nirmala Sitharaman put forward the introduction of a new scheme called NPS Vatsalya. This scheme is designed to be a National Pension Scheme (NPS) specifically for minors, enabling parents to make contributions on behalf of their children towards NPS in order to ensure their future security and assist in building a retirement fund.
Parents and guardians have the option to open an NPS account for their children under this program, allowing them to make regular contributions on a monthly or yearly basis until the child turns 18.
Upon reaching the age of majority (18 years), the NPS Vatsalya scheme may be transformed into a standard NPS account, allowing the child to manage it autonomously. The accumulated contribution in the NPS Vatsalya account will then be moved to the regular NPS account once the child turns 18.
Parents and guardians, regardless of their citizenship status, can open an NPS Vatsalya account for their underage children.
NPS Vatsalya Scheme – Should you invest?
It looks like a typical gimmick to me. Ideally, parents must plan for their kid’s education or to a certain extent marriage planning but not for kids’ retirement planning 🙂
It is crucial to have a well-thought-out plan for parents’ retirement, as well as a plan for children’s education, before embarking on retirement planning for kids.
Providing financial support for your children’s education and partially for their marriage is a parental duty, but it is important to remember that children need to have the opportunity to explore, learn, and strive for success in life on their own.
Warren Buffet emphasized in the above quote the importance of providing enough wealth for children to stand on their own, rather than relying on accumulated wealth indefinitely. It is uncertain whether they will contribute to your assets or deplete them in the future.
I think that even if in the future the government offers certain tax benefits for investing in the NPS Vatsalya Scheme, it may not be a good choice for saving on taxes. We always look for tax-saving options but we don’t know the future of NPS once your kid turns 60 years.
If you are still considering investing for your children’s retirement, a straightforward PPF (as debt) and Index Mutual Fund (as equity) can meet your wealth creation needs. However, I recommend investing in your own name rather than your children’s, as we cannot predict how they may change in the future.
Refer to our latest articles on Budget 2024 –
