What it is
NPS Vatsalya is a voluntary savings and pension scheme built only for children under 18. It is part of the National Pension System (NPS), and the pension sector regulator, PFRDA, oversees it.
The child is the subscriber and sole beneficiary. A parent or legal guardian opens the account and runs it until the child turns 18. A Permanent Retirement Account Number (PRAN), the unique number that identifies an NPS account, is issued in the child’s name.
Any Indian citizen below 18 can have one, including eligible NRIs and OCIs (Overseas Citizens of India). The scheme is open regardless of gender. PFRDA says the government announced it in the Union Budget for 2024-25 and brought it into operation on 18 September 2024.
How it works
Opening and contributing
You can apply in person at a registered Point of Presence (PoP), the intermediaries that handle NPS accounts, or go online through a PoP’s facility or the eNPS platform. The guardian picks a Central Recordkeeping Agency and a Pension Fund.
The minimum is ₹250 at opening and ₹250 in each financial year. Later top-ups can be as low as ₹10. There is no maximum, and no limit on the number of contributions in a year. Parents, relatives and friends can all contribute, including through UPI apps. A grandparent can open the account only if they are the legal guardian.
Missing a year’s contribution does not automatically close the account.
Documents
- For the child: proof of date of birth, such as a birth certificate or school leaving certificate.
- For the parent or guardian: a KYC document such as Aadhaar or passport, plus PAN or Form 60.
- A bank account is optional for resident Indians at opening but mandatory for NRIs and OCIs.
Investment and returns
The chosen Pension Fund invests the money. Returns are market-linked and not guaranteed, and there is no fixed interest rate. Funds may allocate up to 100% to equity, or follow an indicative pattern with limits of 75% equity, 20% government securities, 30% debt instruments and 10% money market instruments. Charges match those under the NPS All Citizen Model. The Pension Fund can be changed once in a financial year.
Compare this with a fixed-return scheme such as Sukanya Samriddhi Yojana. PFRDA says the two can be held together.
Withdrawals
After a minimum 3-year lock-in from opening, up to 25% of the child’s own contributions (excluding returns) can be withdrawn for education, treatment of specified illnesses, or disability of more than 75%. Before 18, a maximum of two withdrawals is allowed. Between 18 and 21, two more are allowed, subject to KYC.
At 18
The subscriber must complete fresh KYC and give nominee details, and the account then passes to them. There are three paths:
- Stay in NPS Vatsalya until 21.
- Move the full balance into regular NPS, either under the All Citizen Model or another model that applies, once KYC is done.
- Exit. If the balance is under ₹8 lakh, it can all be taken as cash. At ₹8 lakh or more, up to 80% can be taken as cash and at least 20% must go towards an annuity (a regular pension income).
If the subscriber picks nothing between 18 and 21, the account is moved on its own into a scheme with a larger equity share, run by the same Pension Fund under its Multiple Schemes Framework.
What it means for you
Tax treatment depends on the regime you file under. See our guide to the old and new tax regimes.
| Stage | Old regime | New regime |
|---|---|---|
| Contribution | Deduction up to ₹50,000 under Section 124(4) of the Income-tax Act, 2025 | No deduction |
| Partial withdrawal | Up to 25% of own contributions exempt | Same exemption |
| Exit | Lump sum up to 60% of corpus exempt; annuity purchase exempt | Same exemption |
If the child dies, the entire accumulated wealth is payable to the guardian, nominee or legal heir, and the amount is not treated as their income. If the guardian dies, a new guardian must be registered with KYC documents.
Because returns are market-linked and money is largely locked in until adulthood, the scheme suits a long horizon. You can estimate growth under assumed returns with the Compound Interest Calculator, though actual results will vary.
Common mistakes to avoid
- Assuming returns are guaranteed. They are not.
- Expecting a tax deduction under the new regime. None is available for this contribution.
- Forgetting that the child needs fresh KYC and nominee details at 18.
- Counting on withdrawals before the 3-year lock-in ends, or for purposes outside the permitted list.
Grievances can be lodged at PFRDA’s Pension Sahayak portal. Intermediaries must resolve them within 30 days.
