Most parents have a rough plan for their child's education. Very few think about the child's retirement before the child can even read.
That is the gap NPS Vatsalya fills. Launched by Finance Minister Nirmala Sitharaman on September 18, 2024 under the Union Budget 2024-25, it lets parents open a pension account in a minor child's name and start building a retirement corpus from day one. The scheme runs under the National Pension System (NPS) framework and is regulated by PFRDA. As of August 2025, over 1.30 lakh minor subscribers were already enrolled.
Here is everything about the scheme in 2026 eligibility, tax benefits, investment options, withdrawal rules, and how it compares to other child savings options.
Feature
Details
Launched by
Government of India, Union Budget 2024-25
Launch date
September 18, 2024
Regulated by
PFRDA
Who opens the account
Parent or legal guardian of the minor
Beneficiary
Minor child only
Eligible children
Indian citizens below 18, including NRI and OCI children
Minimum contribution
Rs. 1,000 per year
Maximum contribution
No upper limit
Returns
Market-linked (historically 9.5% to 10% p.a.)
Tax benefit
Rs. 50,000 under Section 80CCD(1B) effective April 1, 2025
Partial withdrawal
Up to 25% of contributions, after 3 years, max 3 times before child turns 18
At age 18
Converts to standard NPS account, or exit with conditions
NPS Vatsalya is a pension scheme for children below 18. The parent or legal guardian opens the account, makes contributions, and manages it until the child becomes an adult. Once the child turns 18, the account moves into a regular NPS account and the child takes over independently.
The name comes from Sanskrit. "Vatsalya" means parental love and affection the idea being that thoughtful financial planning is itself a form of care. The scheme was introduced under the government's broader Viksit Bharat 2047 vision of building financially secure future generations.
Unlike the regular NPS, where an individual saves for their own retirement, NPS Vatsalya is always opened by one person for another. The child is the beneficiary. The parent or guardian is the operator until age 18.
One detail worth knowing that many articles miss: beyond parents and guardians, relatives and friends can also make gift contributions to a child's NPS Vatsalya account. PFRDA officially permits this, which means grandparents, aunts, or uncles can top up the same account.
Children who can be enrolled:
Who can open and operate the account:
The minor child is the sole beneficiary. The guardian operates the account but the funds belong to the child.
Following Budget 2025, all NPS tax benefits were extended to NPS Vatsalya accounts, effective April 1, 2025.
Under the Old Tax Regime:
Section 80CCD(1B) allows parents an additional deduction of up to Rs. 50,000 for NPS Vatsalya contributions. This is on top of the Rs. 1.5 lakh ceiling under Section 80C. So the maximum deduction from NPS Vatsalya contributions alone reaches Rs. 2 lakh per year when both provisions are used together.
Under the New Tax Regime:
The Section 80CCD(1B) deduction is not available. Parents filing under the new regime do not get this tax benefit.
Partial withdrawal tax treatment:
Withdrawals up to 25% of contributions for prescribed purposes education, specified illnesses, disability above 75% are tax-exempt under Section 10(12B).
Based on the Income Tax Act, 1961 as applicable for FY 2025-26 (AY 2026-27). Consult a CA for your specific situation.
NPS Vatsalya has no fixed interest rate. Returns are market-linked and depend on the pension fund manager and asset allocation chosen.
Across NPS funds over the long term, returns have historically ranged between 9.5% and 10% per year. The equity-heavy option LC-75 at 75% equity has delivered higher returns over 15 to 20-year horizons. The conservative option LC-25 at 25% equity is more stable but grows more slowly.
A child enrolled at age 3 has a potential 55-year investment horizon before retirement. Over that kind of timeline, small differences in annual returns compound into very large differences in corpus.
Default Choice: If parents do not actively select anything, contributions go into the Moderate Lifecycle Fund (LC-50) 50% equity, 50% debt.
Auto Choice: Three lifecycle fund options based on risk preference:
Lifecycle funds automatically reduce equity exposure as the child ages, shifting gradually toward safer instruments.
Active Choice: Parents decide the asset allocation manually:
Active Choice suits parents who track markets and want full control. For most people, Auto Choice with the Aggressive or Moderate fund is the practical starting point.
For the guardian (KYC):
For the minor child (date of birth proof):
Additional for NRI subscribers:
Additional for OCI subscribers:
Step 1: Go to the eNPS Portal
Visit enps.nsdl.com and select the NPS Vatsalya account opening option. Choose a Central Recordkeeping Agency Protean (formerly NSDL), KFintech, or CAMS.
Step 2: Enter Child and Guardian Details
Fill in the child's name and date of birth. The guardian enters their PAN, Aadhaar, and contact details.
Step 3: Complete KYC Verification
Complete Aadhaar-based KYC for the guardian. NRI subscribers upload a passport copy. OCI subscribers add foreign address proof.
Step 4: Select Pension Fund Manager and Investment Option
Choose from available fund managers SBI Pension Funds, HDFC Pension, ICICI Pru Pension, and others. Select Auto Choice or Active Choice.
Step 5: Make Initial Contribution
Pay the Rs. 1,000 minimum via net banking or UPI. The account activates once payment is confirmed.
Step 6: Save PRAN and Confirmation
A Permanent Retirement Account Number (PRAN) is issued in the child's name. Download the acknowledgement. This PRAN is used for all future contributions.
Offline option: Visit any authorised bank branch or PFRDA-registered Point of Presence (PoP) with the required documents.
Rule
Minimum per year
Rs. 1,000
Maximum per year
No limit
Contribution frequency
Monthly, quarterly, or annually
Who can contribute
Parents, guardians, and relatives or friends (gift contributions allowed)
If the Rs. 1,000 annual minimum is not met, the account may get frozen. It reactivates once the minimum is deposited.
Partial Withdrawal Before Age 18
Allowed under strict conditions only:
There is no general emergency withdrawal provision. The scheme is not designed for liquidity before the child turns 18.
When the Child Turns 18
The child must complete a fresh KYC within 3 months of turning 18. Two paths are then available:
Option 1 Convert to regular NPS: The full accumulated corpus transfers to a standard NPS account. The child manages it independently going forward, building toward retirement.
Option 2 Exit from NPS Vatsalya: The child can choose to exit under standard PFRDA exit rules instead of converting.
Death-Related Rules
Situation
What Happens
Minor child (subscriber) dies
Entire corpus returned to the guardian (the nominee)
Guardian dies
A new guardian registers through fresh KYC
Both parents die
Legal guardian continues the account; no mandatory contributions required until child turns 18
Both are government-backed long-term savings schemes. They target different goals.
NPS Vatsalya
Sukanya Samriddhi Yojana (SSY)
Boys and girls
Girls only
Return type
Market-linked
Fixed, government-declared
Current return
9.5% to 10% historically
8.2% p.a. (2026)
Return guarantee
No
Yes
Up to Rs. 2 lakh deduction (old regime)
EEE invest, earn, withdraw all tax-free
Primary goal
Long-term retirement corpus
Education and marriage savings
Risk level
Moderate
Low
Lock-in
Till 18, then continues as NPS
Till girl turns 21
Partial access
Yes, with strict conditions
Yes, at age 18 for education
Can both be held
Yes girl child can hold both
Bottom line: SSY is better suited for guaranteed, tax-free savings for a daughter's education or marriage. NPS Vatsalya works for parents of boys or girls who want equity-linked growth over a long horizon for retirement planning. A girl child can hold both accounts at the same time.
Good fit for:
Not the right fit for:
NPS Vatsalya is a pension scheme for minor children below 18, launched in September 2024. Parents or legal guardians open and manage the account. When the child turns 18, the account converts into a standard NPS account the child operates independently.
There is no fixed rate. Returns are market-linked. Historical NPS fund returns have ranged between 9.5% and 10% per year over the long term.
Under the old tax regime, parents can claim up to Rs. 50,000 additional deduction under Section 80CCD(1B), effective April 1, 2025. Combined with Section 80C, total deduction goes up to Rs. 2 lakh. Under the new tax regime, this deduction is not available.
Not entirely. Contributions up to Rs. 2 lakh per year can be claimed as deductions under the old regime. Amounts above this are not deductible. Partial withdrawals for specified purposes are tax-exempt under Section 10(12B).
Yes, if they are the legal guardian of the child.
Yes. PFRDA allows relatives and friends to make gift contributions to a child's NPS Vatsalya account.
Yes. A separate account with a separate PRAN can be opened for each minor child.
At Rs. 5,000 per month for 20 years, total investment is Rs. 12 lakh. At 10% annual returns, the estimated corpus is around Rs. 38 lakh. If that corpus remains invested through the child's working life, compound growth over another 30 to 35 years substantially increases the final amount.
The account stays active but may freeze if the Rs. 1,000 annual minimum is not met. The existing corpus stays invested and can be reactivated by depositing the minimum amount.
Yes. NRI and OCI children below 18 are eligible, subject to KYC requirements and an NRE or NRO bank account.
Yes. There is no restriction on holding both simultaneously.
NPS is a retirement scheme for adults above 18 who open and operate the account themselves. NPS Vatsalya is opened by a parent or guardian for a minor. When the child turns 18, the NPS Vatsalya account converts into a regular NPS account.
No. Returns are market-linked and vary based on the fund manager's performance and asset allocation.
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