NPS Vatsalya (For Minors)

Launched in the 2024 Budget, NPS Vatsalya enables parents or guardians to open NPS accounts for children under 18, initiating early retirement planning.

• What Makes It Unique:
  
  • Investment can begin from birth with a minimal contribution of ₹1,000 per year.
  • Supports Active Choice (custom asset allocation) or Auto Choice (LC-75 aggressive, LC 50 moderate, LC 25 conservative).
• Investment Structure & Growth:
  
  • Historical rates: default 50:30:20 mix average return ~11.59%; aggressive (75% equity) saw ~12.86%.
  • A ₹10k/year investment over 18 years could grow to ₹2.75 crore or more by age 18—and could compound further until retirement.
• Withdrawal & Conversion:
  
  • After 3-year lock-in, up to 25% can be taken (for education, medical, etc.)—maximum 3 times before the child reaches 18. If corpus ≤ ₹2.5 lakh at 18, full withdrawal allowed; otherwise, 20% lump sum and the rest in annuity. Account seamlessly converts into Tier-I NPS.
• Tax Status:
  

  Offers EEE (Exempt–Exempt–Exempt) status—investments, growth, and certain withdrawals are tax-advantaged under Section 80CCD and general NPS rules.

• Public Sentiment:
  
  • Many appreciate its long-term discipline and compounding benefits.
  • Critics raise concerns over the extended lock-in and limited liquidity—arguing it’s better suited for generational wealth planning than flexible savings.