Budget 2024-25: FM Sitharaman Introduces NPS Vatsalya To Allow Parents To Open Account On Behalf Of Minors

Delivering the Union Budget 2024-25 in parliament on Tuesday, Finance Minister Nirmala Sitharaman introduced a new scheme under the National Pension System (NPS) called Vatsalya, which allows parents to open an account and contribute on behalf of their minor children. Under the scheme, parents can later transfer the account to their children. Until now, the minimum and maximum age to enter NPS was 18 and 70, respectively. Sitharaman said the NPS Vatsalya scheme will become a regular NPS account after the minor reaches the age of 18. NPS is a market-linked pension scheme that was initially introduced for government employees in 2004 before opening to all citizens in 2009. Considering the growing elderly population in India, pension reforms have been long overdue. Allowing NPS accounts for minors would help further expand the scheme. NPS Vatsalya will also be a long-term savings scheme for retirement. ALSO READ: Union Budget 2024-25: FM Sitharaman Announces 3 Employment-linked Incentive Schemes Based On EPFO Enrollment Over the years, NPS has undergone several changes, from the flexibility of withdrawal through systematic lumpsum payments and partial withdrawal options to selecting pension fund managers and central recordkeeping agencies. The scheme is now available through banks, post offices, and online platforms, making it more accessible to people. ALSO READ: Economic Survey 2023-24: India’s Pension Sector Sees Growth, Yet Challenges Remain

NPS Vatsalya 

The NPS Vatsalya scheme will further complement the government’s efforts in finding a long-lasting solution to addressing the issue financial security of the common citizen while maintaining fiscal prudence. It is expected to be a step towards providing a robust pension system that caters to the needs of all citizens.

Govt Allows Higher Employers’ Contribution In NPS

Sitharaman said this critical decision would help enhance the employees’ social and financial security. She said, “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”. ALSO READ: Economic Survey 2023-24: Payroll Additions Under EPFO More Than Double In 5 Years The provision to contribute a higher amount in NPS has been a long-standing demand from various quarters. Sitharaman’s announcement in the budget is another positive step towards securing the financial security of the salaried class.