NPS Vatsalya Scheme: A Detailed Guide by Ultra

What is the NPS Vatsalya Scheme?

Planning for retirement is one of the most important aspects of financial well-being. To promote financial security for senior citizens, the Government of India has launched multiple pension schemes. One of the recent additions is the NPS Vatsalya Scheme, a unique category under the National Pension System (NPS) that provides financial protection for dependent parents of NPS subscribers.

In this article by Ultra, a digital platform offering multiple investment opportunities, we break down the NPS Vatsalya Scheme, its benefits, interest rates, eligibility, tax benefits, and how you can apply.

The NPS Vatsalya Scheme, also called the NPS Vatsalya Pension Scheme, is a special category under the National Pension System (NPS) launched to cover dependent parents of existing NPS subscribers. It aims to ensure elderly parents also receive a regular pension income and financial security.

Mission Vatsalya Scheme is sometimes confused with the NPS Vatsalya Scheme. However, Mission Vatsalya is different and relates to child welfare. The NPS Vatsalya Scheme specifically focuses on senior citizens.

NPS Vatsalya Scheme Launch Date

The NPS Vatsalya Scheme was officially introduced in March 2024 by the Pension Fund Regulatory and Development Authority (PFRDA) through the NPS Trust. The scheme aims to widen the social security net for dependent parents.

Key Features of the NPS Vatsalya Scheme

1. Who Can Join?

• Only dependent parents of an existing NPS subscriber.

• The subscriber must open a separate NPS Vatsalya account for their parent(s).

2. Minimum Contribution

• The minimum annual contribution is ₹1,000.

• There is no upper limit on contributions.

3. NPS Vatsalya Scheme Interest Rate

The NPS Vatsalya Scheme interest rate is market-linked, similar to the regular NPS. The returns are based on the performance of the pension funds selected. Historically, NPS returns have ranged from 8% to 10% p.a., but this is not guaranteed.

NPS Vatsalya Scheme Tax Benefits

Investments made under the NPS Vatsalya Scheme qualify for tax benefits under Section 80CCD(1B) of the Income Tax Act, allowing additional deductions up to ₹50,000 over and above the ₹1.5 lakh limit under Section 80C.

The maturity amount used to buy an annuity is also tax-exempt, while the annuity income is taxable as per the subscriber’s slab.

How to Apply for the NPS Vatsalya Scheme

Applying for the NPS Vatsalya Scheme is simple:

• Visit any authorized Point of Presence (PoP) like banks (e.g., SBI, Central Bank of India).

• Fill in the NPS Vatsalya form with KYC documents.

• Submit proof of relationship to show the dependent status.

• Make the first contribution.

• Get your unique PRAN (Permanent Retirement Account Number) for the Vatsalya account.

• Alternatively, you can apply online via the official NPS Trust portal or partner bank websites.

Benefits of the NPS Vatsalya Scheme

• Financial Security for Parents: Regular pension during retirement

• Flexible Contributions: You can contribute any amount above the minimum.

• Portable: Account can be operated across India.

• Professional Fund Management: Regulated by PFRDA.

• Tax Savings: Additional tax deductions.

FAQs about the NPS Vatsalya Scheme

1. What is the NPS Vatsalya Scheme?

The NPS Vatsalya Scheme is a pension scheme under NPS that allows dependent parents of subscribers to get pension benefits through a separate account.

2. What is the interest rate for the NPS Vatsalya Scheme?

The interest rate is not fixed. It is market-linked and depends on the performance of the pension funds selected, typically between 8% and 10% per annum.

3. How to apply for the NPS Vatsalya Scheme?

You can apply online through the NPS Trust portal or offline by visiting authorized banks like SBI, Central Bank of India, or other PoPs.

4. Are there any tax benefits under the NPS Vatsalya Scheme?

Yes. Contributions qualify for tax deductions under Section 80CCD(1B) up to ₹50,000 in addition to Section 80C.

5. Can I open an NPS Vatsalya account for both parents?

Yes. You can open separate accounts for each dependent parent under the NPS Vatsalya Scheme.