The central government has announced a new budget opportunity for parents to save for their children’s future. The National Pension Scheme (NPS) has been changed to include minors.
The central government has launched the NPS Vatsalya, a new scheme for children. It will allow parents or guardians to invest in their children’s names. Under this scheme, Rs.2 lakh will be benefited.
It is a retirement gift from parents for their children. It is a pension plan for their kids. Once the children turn 18, their account will automatically become a regular NPS account, providing a fixed income upon completion of the plan.
The NPS Vatsalya scheme encourages long-term financial planning for children, providing a solid financial foundation at an early age.
Parents and guardians can open this account in the child’s name, enabling them to accumulate a substantial amount through regular investments and the benefits of compound interest.
This scheme also helps instil the habit of saving in children from an early age and promotes financial awareness regarding long-term investments.
Investment in the NPS Vatsalya will likely yield substantial returns over the long term, ensuring a large amount of funds for the child’s retirement. It is recommended that investors invest Rs. 500 per month or Rs. 6,000 per year in the NPS account.
In addition to the NPS Vatsalya, those interested in investing in their children’s names can explore Praja Bhavishya Nidhi (PPF), a government-guaranteed scheme.
PPF allows deposits ranging from Rs. 500 to a maximum of Rs. 1,50,000 per year, with an option to choose 15 years, extendable by another five years. At present, PPF earns 7.1% interest, and the interest earned is tax-free.
National Pension Scheme: The Center introduced the NPS in 2004 to provide social security to all Indians. One key benefit of NPS is its significant tax benefits, allowing you to save up to Rs.2 lakh in taxes.
Who is eligible for NPS? If you are a resident, non-resident, or foreign national of India, you can open an NPS account if you fulfil the required conditions.
Under section 80CCD (1B), including tax exemption of Rs.50 thousand, one can get Rs.1.50 lakh under section 80c. This benefit is under the old tax system. It is also extremely popular as a long-term investment.
An NPS subscriber can invest in the scheme of his choice, such as corporate bonds, equities, or government securities.
After retirement, the subscriber can immediately withdraw 60% from the NPS fund and buy the remaining 40% in annuity schemes. This way, the pension can be received gradually.