NPS Vatsalya: Budget 2024 announced New Pension Plan for Children
Keep Your NPS Account Updated: A Simple Guide to Changing Bank Details
Parents can now secure their children’s future with the NPS Vatsalya plan, allowing them to contribute to a pension scheme for minors. Under this scheme, parents and guardians can make contributions on behalf of their children, which will convert to a regular NPS account when the child turns 18.
The Central Government established the National Pension System (NPS) to provide individuals with a pension income for their retirement needs. The Pension Fund Regulatory and Development Authority (PFRDA) regulates and administers NPS under the PFRDA Act, 2013.
Ranbheer Singh Dhariwal, Chief Executive Officer of Max Life Pension Fund Management, highlighted the benefits of the NPS Vatsalya initiative. “By allowing parents and guardians to initiate their minor child’s NPS account, the initiative sets the foundation for responsible financial management from an early age. As these accounts transition into regular NPS plans upon adulthood, they provide a smooth continuation of savings habits into adulthood. Additionally, the proposed increase in employer contributions to NPS from 10 to 14 percent reinforces the role of employers in fostering long-term financial and social security for their workforce,” said Dhariwal.
Employees contributing to NPS are eligible for several tax benefits on their own contributions. These include a tax deduction of up to 10% of salary (Basic + DA) under Section 80CCD(1) within the overall ceiling of Rs. 1.50 lakh under Section 80CCE, and an additional tax deduction of up to Rs 50,000 under Section 80CCD(1B) over and above the overall ceiling of Rs. 1.50 lakh under Section 80CCE.
For employer contributions, employees are eligible for a tax deduction of up to 10% of salary (Basic + DA) (14% if the contribution is made by the Central Government) under Section 80CCD(2) over the Rs. 1.50 lakh limit provided under Section 80CCE.
Self-employed individuals contributing to NPS also enjoy tax benefits. These include a tax deduction of up to 20% of gross income under Section 80CCD(1) within the overall ceiling of Rs. 1.50 lakh under Section 80CCE, and an additional deduction of up to Rs 50,000 under Section 80CCD(1B) over and above the overall ceiling of Rs. 1.50 lakh under Section 80CCE.
Akhil Chandna, Partner at Grant Thornton Bharat, praised the Finance Minister’s decision to increase the deduction available on employer contributions to NPS for private sector employees from 10% to 14% of salary for those opting for the new tax regime. He also welcomed the introduction of the NPS Vatsalya scheme, noting that it will enable parents and guardians to contribute to a pension plan for minors, which can be converted into a regular NPS account once the child reaches adulthood. Chandna emphasized that these proposals are a positive step towards encouraging savings in pension plans.
How to Open an NPS Account Online
- Visit the official eNPS website (https://enps.nsdl.com/eNPS/NationalPension-System.html) or any authorized bank or financial institution offering NPS services.
- Click on ‘Registration’ and then select ‘New Registration’.
- Provide your Aadhaar or PAN number, mobile number, and email ID.
- Choose one of the three central recordkeeping agencies for maintaining your NPS account details.
- After OTP validation, fill in your details.
