New Delhi: Finance Minister Nirmala Sitharaman on July 23, introduced a groundbreaking pension scheme for minors in Union Budget 2024. Named the NPS Vatsalya, this new initiative allows parents and guardians to start a pension plan for their children, laying the groundwork for early financial responsibility and long-term security. The NPS Vatsalya scheme is designed to help parents and guardians invest in a pension plan for their minor children. Under this scheme, guardians make regular contributions to a dedicated account. Once the child turns 18, the account transitions seamlessly into a regular National Pension Scheme (NPS) plan.What is National Pension Scheme (NPS)The National Pension Scheme (NPS) is a voluntary pension system available to all Indian citizens, including Non-Resident Indians (NRIs), between the ages of 18 and 70. It is a market-linked contribution scheme designed to help individuals systematically save for retirement while also offering tax benefits.Current tax benefits under NPSFor self-contributing employees:Tax Deduction: Up to 10% of salary (Basic + Dearness Allowance) under Section 80 CCD(1), within the overall ceiling of Rs 1.50 lakh under Section 80 CCE.Additional Deduction: Up to ₹50,000 under Section 80 CCD(1B), which is over and above the Rs 1.50 lakh ceiling under Section 80 CCE.For employees with employer contributions:Tax Deduction: Up to 10% of salary (Basic + DA) (or 14% if the Central Government is the employer) contributed by the employer under Section 80 CCD(2), beyond the Rs 1.50 lakh limit under Section 80 CCE.The Union Budget 2024 has further increased the deduction limit for employer contributions to NPS for private sector employees from 10% to 14% of the salary under the new tax regime.For self-employed individualsTax Deduction: Up to 20% of gross income under Section 80 CCD(1), within the overall ceiling of Rs. 1.50 lakh under Section 80 CCE.Additional Deduction: Up to ₹50,000 under Section 80 CCD(1B), over and above the Rs. 1.50 lakh ceiling under Section 80 CCE.How to apply for NPS VatsalyTo start an NPS Vatsalya account, parents or guardians should approach a registered NPS service provider or a bank offering the scheme. The process involves submitting necessary documents, including identification proof and details of the minor child. Contributions can be made regularly, and once the child turns 18, the account will automatically transition into a regular NPS plan.
