New Delhi, India

In the Union Budget 2024, Finance Minister Nirmala Sitharaman made the announcement of a new pension scheme under the National Pension Scheme (NPS), called NPS Vatsalya which is a financial plan that caters to the minor children's parents and guardians. 

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“NPS Vatsalya, a plan for contribution by parents and guardians for minors will start,” Sitharaman said.

The plan is unique because it has the feature of getting converted into a non-NPS plan once the child becomes the major account holder. 

“On attaining the age of majority, the plan can be converted seamlessly into a non-NPS plan,” the finance minister said in her Budget speech.

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With this plan, the parents and guardians are now empowered to plan pensions for their children at a very early stage.

Also Read: Union Budget 2024: FM Sitharaman makes big announcements on Income Tax. Here's all you need to know

FM Sitharaman also increased the National Pension Scheme limit for employers in the private sector from 10 per cent to 14 per cent of the employee's salary.

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"To improve social security benefits, deduction of expenditure by employers towards NPS is proposed to be increased from 10 to 14 per cent of the employee’s salary. Similarly, deduction of this expenditure up to 14 per cent of salary from the income of employees in the private sector, public sector banks and undertakings, opting for the new tax regime, is proposed to be provided," said the FM, in her Budget Speech.

What is NPS Vatsalya?

NPS Vatsalya is a pension scheme introduced for minors where the parents and guardians are empowered to make contributions. Once the child becomes a major account holder after the age of 18, the scheme will be converted into a regular NPS. 

All about NPS and its eligibility 

The Central Government has introduced NPS for individuals to save a part of their income which can later be transformed into a pension and fulfill their retirement needs.

A citizen of India, either a resident, non-resident or an Overseas Citizen of India, can open an NPS account. 

Watch | Budget 2024: Finance Min Nirmala Sitharaman presents budget 2024, says 'Rs 2 lakh cr for 5 schemes'

An individual can also claim tax benefits after making an investment in the NPS under Sec 80 CCD (1) within the overall ceiling of Rs. 1.5 lac under Sec 80 CCE.

Under subsection 80CCD (1B), NPS subscribers can also claim an additional deduction for investments up to Rs. 50,000 in NPS (Tier I). This deduction is over and above Rs. 1.5 lakh tax exemption under section 80C of the Income Tax Act 1961.

(With inputs from agencies)