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Budget 2024 Introduces NPS Vatsalya: A New Pension Scheme for Minors, Know Details


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The Budget 2024 has introduced the National Pension Scheme for Minors, named NPS Vatsalya. This initiative allows parents to plan pensions for their children, ensuring financial security from an early age. Once the child reaches adulthood (18 years), the NPS Vatsalya account will convert into a regular NPS account.

NPS Vatsalya Plan

NPS Vatsalya is designed specifically for minors, with contributions made by parents or guardians. The objective is to secure the future of children by instilling a habit of saving for retirement early on. This plan seamlessly transitions into a regular NPS account upon the child attaining 18 years of age.

Benefits and Features

Early Financial Management: By initiating NPS accounts for minors, parents can foster responsible financial management habits early. This continuity from NPS Vatsalya to regular NPS helps in maintaining a consistent savings approach into adulthood.

Increased Employer Contribution: The proposed increase in employer contributions to NPS from 10% to 14% underlines the importance of long-term financial and social security. Employers play a significant role in encouraging retirement savings among their workforce.

Expert Opinions

Ranbheer Singh Dhariwal, CEO, Max Life Pension Fund Management: “Allowing parents and guardians to start NPS accounts for their minor children sets a foundation for responsible financial management. These accounts transition smoothly into regular NPS plans upon adulthood, promoting a consistent saving habit. The increase in employer contributions from 10% to 14% reinforces employers’ role in fostering long-term financial security.”

Akhil Chandna, Partner, Grant Thornton Bharat: “The Finance Minister has increased the deduction on employer contributions to NPS for private sector employees from 10% to 14% of salary under the new tax regime. Additionally, NPS Vatsalya allows parents and guardians to contribute towards their minor children’s pension plans. This proposal is a positive move towards channeling savings into pension plans.”

National Pension Scheme (NPS) Overview

Introduced by the Central Government, NPS aims to provide individuals with a stable income post-retirement. The Pension Fund Regulatory and Development Authority (PFRDA) administers and regulates NPS under the PFRDA Act, 2013.

Eligibility Criteria

To open an NPS account, the following conditions must be met:

  • Must be an Indian citizen (resident, non-resident, or Overseas Citizen of India)
  • Age between 18 and 70 years at the time of application

How to Register

  1. Visit the official eNPS website or an authorized bank/financial institution offering NPS services.
  2. Click on ‘Registration’ and select ‘New Registration’.
  3. Provide Aadhaar or PAN number, mobile number, and email ID.
  4. Choose one of three central recordkeeping agencies to maintain NPS account details.
  5. Complete OTP validation and fill in personal details.

Tax Benefits for Employees

Employees contributing to NPS can avail the following tax benefits:

  • Section 80 CCD(1): Tax deduction up to 10% of salary (Basic + DA) within the overall ceiling of Rs. 1.50 lakh under Section 80 CCE.
  • Section 80 CCD(1B): Additional tax deduction up to Rs 50,000 over and above the overall ceiling of Rs. 1.50 lakh under Section 80 CCE.
  • Section 80 CCD(2): Tax deduction up to 10% of salary (14% for Central Government contributions) by the employer over the Rs. 1.50 lakh limit under Section 80 CCE.

Tax Benefits for Self-Employed Individuals

Self-employed individuals contributing to NPS can avail the following tax benefits:

  • Section 80 CCD(1): Tax deduction up to 20% of gross income within the overall ceiling of Rs. 1.50 lakh under Section 80 CCE.
  • Section 80 CCD(1B): Additional tax deduction up to Rs 50,000 over and above the overall ceiling of Rs. 1.50 lakh under Section 80 CCE.

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