NPS Vatsalya Scheme Eligibility, Returns and Tax Benefits

Overview

NPS Vatsalya is a scheme under the National Pension System (NPS) for minors below 18.

Investment Choices: Contributions are invested in equity, government securities, debt, and money market instruments.
Account Management: The guardian operates the account until the child turns 18.

Withdrawals & Rules

Partial Withdrawals: You can withdraw up to 25% of contributions (excluding returns) after three years for education, specified illnesses, or disability exceeding 75%.
Transition at 18: The subscriber can continue until 21, shift the corpus to an NPS model, or exit under prescribed rules.

How to Apply?

Where to Open: Accounts can be opened online through eNPS or Points of Presence (PoPs), or offline.
Documents Needed: The minor needs proof of date of birth, while the guardian must provide KYC documents and PAN or Form 60.

What if you could start building your child’s retirement corpus before they even learn what retirement means? That is the idea behind the National Pension System Vatsalya Scheme, a long-term investment option designed for minors.

Launched in September 2024, the scheme gives parents another option to consider when planning their child’s financial future. But before you invest, it is important to understand how NPS Vatsalya works and whether it suits your goals.

In this article, we explain the NPS Vatsalya Scheme, its eligibility, rules, returns, withdrawal provisions, and tax benefits to help you decide whether it is the right fit for your child’s financial goals.

What Is the NPS Vatsalya Scheme?

NPS Vatsalya is a contributory saving cum long term financial security scheme under the National Pension System (NPS), designed exclusively for minors. It aims to enhance financial literacy and financial planning among children and encourage their financial empowerment from an early age, in line with the vision of Viksit Bharat@2047.

Under NPS Vatsalya, the minor is the subscriber, and the scheme issues a Permanent Retirement Account Number (PRAN) in the child’s name when the account is opened. Since the subscriber is below 18 years of age, a parent or legal guardian operates the account on the child’s behalf and exclusively for the minor’s benefit.

The Pension Fund Regulatory and Development Authority (PFRDA) regulates the scheme under the PFRDA Act, 2013, along with the regulations and guidelines it issues.

How Is an NPS Vatsalya Account Opened?

A parent or legal guardian can open an NPS Vatsalya Permanent Retirement Account (PRA) through the following channels:

Online: Through eNPS or the apps and portals provided by registered Points of Presence (PoPs) or Central Recordkeeping Agencies (CRAs).
Offline: By visiting a registered Point of Presence (PoP).

Parents and guardians can use the PFRDA’s list of registered Points of Presence to find an eligible PoP for offline account opening.

The account is opened in the minor's name, with the parent or legal guardian completing the required formalities and operating it until the child turns 18. The account is maintained exclusively for the minor's benefit.

Eligibility Criteria for NPS Vatsalya Scheme

The NPS Vatsalya Yojana is available to Indian citizens below 18 years of age, including Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs).

For resident Indian minors, providing sole or joint bank account details is optional when opening the account. However, bank account details are mandatory for NRI and OCI minors.

Documents Required for NPS Vatsalya

For the Minor:

Proof of Date of Birth: Birth Certificate, School Leaving Certificate, Matriculation Certificate, Permanent Account Number (PAN), or Passport.
Bank Account Details: Optional for resident Indian minors and mandatory for NRI/OCI minors.

For the Guardian:

Know Your Customer (KYC): Aadhaar, Driving License, Passport, Voter ID card, National Rural Employment Guarantee Act (NREGA) Job Card, or National Population Register documents.
Permanent Account Number (PAN): PAN of the guardian or Form 60 declaration.

How NPS Vatsalya Contributions and Returns Work

Contributions to the NPS Vatsalya Account

Parents and guardians can contribute to the NPS Vatsalya account through the following payment modes:

Physical Mode

Visit a registered Point of Presence (PoP) and deposit a cheque or cash along with the NPS contribution slip.

Online

Use the online facility provided by a registered PoP.

eNPS

Make the contribution through the eNPS platform of the NPS Trust.

Other Electronic Modes

Make contributions using UPI, net banking, credit or debit cards, or any other electronic payment mode approved by the Pension Fund Regulatory and Development Authority (PFRDA).

The contribution limits are:

Particulars	Limits
Minimum Contribution to Open the Account	₹250
Minimum Annual Contribution	₹250
Maximum Contribution	No limit

Gift Contributions: Parents and guardians are not the only people who can contribute. Relatives and friends can also make gift contributions to the child's NPS Vatsalya account.

Market-Linked Returns Under NPS Vatsalya

NPS Vatsalya has no fixed interest rate. The scheme provides market-linked returns, so the corpus value depends on investment performance.

Contributions can be invested across permitted asset classes, including:

Equity
Government securities
Debt instruments
Money market instruments

The guardian can select one PFRDA-registered pension fund to manage the child's investments. The fund can follow the indicative asset allocation under the NPS Vatsalya guidelines or design its own allocation, subject to applicable PFRDA guidelines. The selected pension fund can be changed once in a financial year, and investment performance can be tracked through the Statement of Transactions.

The PFRDA's list of registered pension funds provides the available options.

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Withdrawal Rules Under NPS Vatsalya

Partial Withdrawal Before 18

Partial withdrawal is permitted for:

Education of the minor subscriber.
Treatment of specified illnesses.
Disability of more than 75% of the minor subscriber.

The applicable limits are:

Particular	Rule
Lock-In Period	3 years from the date of account opening
Maximum Withdrawal	Up to 25% of contributions, excluding returns
Withdrawals Before 18	Maximum 2
Additional Withdrawals Between 18 and 21	Maximum 2

The 25% limit is calculated on the subscriber's contributions and does not include the returns earned on those contributions.

Note: If the minor subscriber dies, the accumulated pension wealth is payable to the guardian, nominee, or legal heir, as applicable. If the registered guardian dies before the subscriber turns 18, a new guardian must be registered with the required Know Your Customer (KYC) documents.

What Happens When the Child Turns 18 Under NPS Vatsalya?

When the subscriber turns 18, they can decide what to do with the NPS Vatsalya account. They can exercise the available options between the ages of 18 and 21, after completing the required KYC formalities. Fresh KYC and nominee details are mandatory at this stage. Until these details are verified, withdrawals and other transactions are restricted.

Options Available Between 18 and 21

Option	What Happens
Continue With NPS Vatsalya	The subscriber can continue the account for up to 3 years, until they turn 21.
Shift to NPS	After completing KYC, the subscriber can shift the entire accumulated corpus to the NPS All Citizen Model or another applicable NPS model.
Exit	The amount that can be withdrawn depends on the total accumulated corpus.

For an exit, the withdrawal rules are:

Corpus Below ₹8 Lakh: The entire accumulated corpus can be withdrawn.
Corpus of ₹8 Lakh or More: Up to 80% can be withdrawn as a lump sum, while at least 20% must be used to purchase an annuity.

The subscriber also becomes eligible for two additional partial withdrawals between 18 and 21, subject to the applicable partial withdrawal rules.

If the subscriber does not exercise any available option by the time they turn 21, the account automatically shifts to a higher equity scheme under the Multiple Schemes Framework (MSF). From that point, the account is governed by the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015.

Tax Benefits of NPS Vatsalya

NPS Vatsalya provides tax benefits on eligible contributions, partial withdrawals, and exit proceeds. The tax treatment differs between the old and new tax regimes. The latest Pension Fund Regulatory and Development Authority (PFRDA) FAQ, updated on June 16, 2026, provides the following treatment under the Income Tax Act, 2025.

Stage	Old Tax Regime	New Tax Regime
Contribution	Deduction of up to ₹50,000 under Section 124(4). This limit is cumulative across the assessee's own eligible NPS contributions and NPS Vatsalya contributions for up to two minor children.	No deduction available.
Partial Withdrawal	Partial withdrawal of up to 25% of own contributions is exempt when received by the parent or guardian.	The same exemption applies.
Exit or Closure	Up to 80% of a corpus of ₹8 lakh or more can be withdrawn as a lump sum, but only 60% is tax-exempt. Annuity purchase is tax-exempt, while the annuity or pension received later is taxable.	The same exemption applies.
Death of Minor	The amount received by the parent, guardian, or nominee is not treated as their income.	The same exemption applies.

NPS Vatsalya vs. Private Child Investment Plans: Which One to Choose?

NPS Vatsalya is one option for building a long-term corpus for a child, but it is not the same as a child insurance plan or a mutual fund.

Factor	NPS Vatsalya	Child Endowment Plan	Child ULIP	Equity Mutual Fund
Return	Market-linked	Depends on the policy's guaranteed and non-guaranteed benefits.	Market-linked	Market-linked
Insurance	No life insurance cover	Modest Life insurance included	Modest Life insurance included but low cover	No life insurance cover
Liquidity	Restricted under NPS rules	Depends on policy terms and surrender conditions	Subject to the applicable 5-year lock-in and policy terms	Flexible, subject to scheme terms and exit loads
Costs	Applicable NPS charges	Policy and insurance-related charges	Insurance, fund management and other ULIP charges	Expense ratio and exit load (if applicable)
Goal Fit	Long-term retirement corpus with an NPS component	Predetermined long-term financial goals	Long-term investment with insurance	Flexible wealth creation or education goals

NPS Vatsalya may suit parents seeking a long-term, market-linked investment for their child. A child insurance plan can be considered if insurance protection is also important, while equity mutual funds offer greater investment flexibility for families comfortable with market risk.

However, NPS Vatsalya should not replace comprehensive term insurance for the parents or health insurance for the family. These form the core financial protection layer, while child investments should be chosen based on long-term goals.

For more options, you can also read Ditto's guides on investment plans for a girl child and child education plans.

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Conclusion

The right investment for your child depends on your goals, investment horizon, and risk appetite. NPS Vatsalya can help build a long-term, market-linked corpus, while Sukanya Samriddhi Yojana offers government-backed savings for an eligible girl child. Child insurance plans and mutual funds differ in insurance coverage, investment potential, and flexibility.

Before investing, assess the product's lock-in, risks, charges, and withdrawal rules. Most importantly, child investments should not replace financial protection. Ensure your family has adequate life cover through a suitable term insurance plan before investing for your child's future.

Disclaimer: This article is for educational purposes only and does not constitute investment advice. Ditto is not a SEBI/PFRDA-registered investment adviser. Consider consulting one before making an investment decision.

Frequently Asked Questions

What is the minimum yearly contribution required to keep an NPS Vatsalya account active?

No contribution is required merely to keep an NPS Vatsalya account active before age 18. PFRDA prescribes a minimum annual contribution of ₹250, and ₹250 is also the minimum initial contribution needed to open the account. However, if no contribution is made during a financial year, the account is neither impacted nor deactivated until the subscriber turns 18. There is no maximum contribution limit.

Are NRIs and OCIs allowed to open an NPS Vatsalya account for their child?

Yes. NPS Vatsalya is available to Indian citizens below 18 years of age, including Non-Resident Indians (NRIs) or Overseas Citizens of India (OCIs). For an NRI or OCI minor, bank account details are mandatory when opening the account. The account is opened in the minor's name and operated by a parent or legal guardian until the child turns 18.

What happens to the NPS Vatsalya account automatically when my child turns 18?

The account does not automatically close when the child turns 18. After completing the required Know Your Customer (KYC) formalities, the subscriber can continue the account until 21, shift the entire corpus to the NPS All Citizen Model or another applicable NPS model, or exit under the applicable withdrawal rules. If no option is exercised by age 21, the account automatically shifts to a higher equity scheme under the Multiple Schemes Framework (MSF).

Can I withdraw money from NPS Vatsalya before my child turns 18, and for what reasons?

Yes. Partial withdrawal is permitted after three years from the date of account opening for the minor's education, treatment of specified illnesses, or disability exceeding 75%. Withdrawals are limited to 25% of the subscriber's contributions, excluding returns. The subscriber may make up to two partial withdrawals before turning 18. Two additional partial withdrawals are available between ages 18 and 21, subject to the applicable rules.

Is the return on NPS Vatsalya guaranteed like a Sukanya Samriddhi Yojana account?

No. NPS Vatsalya does not offer a fixed or guaranteed interest rate. Contributions are invested in permitted asset classes such as equity, government securities, debt instruments, and money market instruments. The corpus value depends on investment performance and the asset allocation selected by the pension fund. Sukanya Samriddhi Yojana, in contrast, offers a government-notified guaranteed interest rate that is reviewed periodically.

How is NPS Vatsalya different from opening a Sukanya Samriddhi Yojana account for a daughter?

NPS Vatsalya is available to Indian citizens below 18 and offers market-linked returns that are not fixed or guaranteed. Sukanya Samriddhi Yojana is available for a girl child below 10 at account opening and offers a government-notified interest rate, currently 8.2% per annum from July to September 2026. NPS Vatsalya has no maximum contribution limit, while SSY allows up to ₹1.5 lakh annually. Their eligibility, withdrawal, and maturity rules also differ.

What is the Multiple Schemes Framework (MSF) in NPS Vatsalya?

The Multiple Schemes Framework (MSF) allows pension funds to offer different investment schemes under NPS, with varying asset allocations and risk levels. Under NPS Vatsalya, if the subscriber does not choose an option after turning 18 and completing the transition period, the account automatically shifts to a higher equity scheme under the MSF when they turn 21. This means a larger portion of the corpus may be invested in equities.

Does NPS Vatsalya have any charges?

Yes. NPS Vatsalya has relatively low charges compared with many other investment options. These include Point of Presence (PoP) charges, Pension Fund investment management fees, a one-time account opening charge of up to ₹200, and small CRA and administrative charges, along with applicable taxes. Together, the main percentage-based charges are roughly 0.24% to 0.32% of the account value per year, depending on the applicable fees.

Last updated on: 5 Sep, 2026

NPS Vatsalya Scheme: Eligibility, Rules & Tax Benefits