Last Updated on February 1, 2025 at 3:32 pm
NPS Vatsalya is a contributory pension scheme regulated and administered by the PFRDA for all minor Indian citizens. Just like PPF, the account will be opened in the name of the minor and operated by Guardian with the minor as the sole beneficiary.
Read our earlier review: What you need to know before considering NPS Vatsalya
From 1st April 2025 onwards, benefits available to the National Pension Scheme (NPS) under Section 80CCD of the Act are also available to the contributions made to the NPS Vatsalya accounts:
(I) A deduction to be allowed to the parent/guardian’s total income of the amount paid or deposited in the account of any minor under the NPS to a maximum of Rs 50,000/- overall as mandated under sub-section (1B) of section 80CCD; My understanding is this includes self+ Vatsalya contributions. Note: This contribution is not valid in the new tax regime!
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(II) The amount on which deduction has been allowed under sub-section (1B) of section 80CCD or any amount accrued thereon, will be charged to tax when such amount is withdrawn, in the case where the deposit was made in the account of a minor; and
(III) The amount on which deduction has been allowed and is received on the closure of the account due to the death of the minor shall not be deemed to be the income of the parent/guardian;
Any withdrawal from the NPS Vatsalya Scheme (due to contingency situations like education, treatment of specified illnesses and disability) that is less than or equal to 25% of total contributions made by the guardian shall not be included in the total income of the parent/guardian.
Our take: Stop making investment decisions based on taxation or tax deductions and focus on building wealth. NPS Vatsalya is not necessary.