New Pension Scheme ‘Vatsalya’

New Pension Scheme ‘Vatsalya’

The Union Budget 2024-25 introduced the National Pension Scheme (NPS) Vatsalya, a revolutionary pension scheme designed for minors. This initiative allows parents or guardians to open an NPS account for their children, helping them develop responsible financial habits from an early age.

Key Features of NPS Vatsalya:

1. Contributory Pension Scheme: The scheme is contributory, meaning that parents or guardians will make regular contributions to the NPS account for their children. This lays a strong foundation for saving and financial discipline as the child grows.
2. Transition to Regular NPS: Once the child reaches adulthood (18 years), the NPS Vatsalya account will seamlessly convert into a regular NPS account. This ensures the continuation of systematic saving for retirement, promoting a lifelong saving habit.
3. Voluntary and Market-Linked: Like the regular NPS, the NPS Vatsalya is a voluntary, market-linked pension system. It is designed to allow citizens, including minors once they are of legal age, to save for their retirement through a variety of investment options that can offer potentially higher returns linked to market performance.
4. Tax Benefits: Contributions to the NPS scheme, including those made under NPS Vatsalya, offer tax benefits under Section 80C and 80CCD of the Income Tax Act, further incentivizing regular savings for retirement.

NPS Overview: The National Pension Scheme (NPS) is a voluntary pension system available to all Indian citizens, including Non-Resident Indians (NRIs), aged between 18 and 70. It is designed to encourage individuals to save systematically for their retirement. The scheme provides a mix of equity, corporate bonds, government securities, and other investment instruments, ensuring that contributors benefit from potential market-linked returns.

By introducing the NPS Vatsalya, the government aims to integrate financial planning into the lives of young Indians, fostering early saving habits and preparing future generations for financial security in their retirement years.

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