NPS Vatsalya—How To Apply, Investment Amount And Withdrawal
The Union government on Thursday introduced a new variant of its National Pension Scheme, called NPS Vatsalya, for children below the age of 18 years. The scheme aims to help parents provide for the future goals of their children.
Here are some of the key details about the new option.
Who Can Apply?
Any Indian citizen can apply on behalf of a minor, who is also an Indian citizen. Non resident Indians can also apply under the scheme, but will need to provide their bank proof, foreign address and a copy of their passport.
How To Apply?
Guardians can open the NPS Vatsalya account for the minor in branches of major banks and the Post Office. The account can also be opened in the eNPS website, under the NPS Vatsalya Minors section.
Identity proofs and address proofs are required to create an account.
Copies of the guardian's Aadhaar, driving licence, passport or voter ID card, along with a few other options can be submitted. As for the minor, proof of date of birth and the signature of the guardian is required.
How Much Can You Invest?
The minimum amount for subscription to the scheme is Rs 1,000 per annum.
After the initial amount is paid, any amount above Rs 1,000 can be invested into the account by the guardian per year.
Investment Portfolio
Similar to the National Pension Scheme, there are a few investment options available under NPS Vatsalya. Here, the guardian can choose the allocation for the investment from three available options.
The default choice is the Moderate Life Cycle fund, which invests 50% in equities. The second option is the Aggressive Lifecycle fund where 75% of the investment goes into equities.
In the third option, the guardian can choose the allocation. They can allocate up to 75% equities, up to 100% corporate debt, up to 100% government securities and up to 5% in alternate assets.
Maturity And Withdrawal
While the child is below 18 years, up to 25% of contribution, after a lock-in period of three years, will be available for withdrawal for certain purposes. Three withdrawals in total are allowed for education, specified illness and disability.
The account will be seamlessly shifted to NPS Tier-I (All Citizen) after the minor turns 18 years of age. To complete this process, a fresh Know-Your-Customer form will need to be filled within three months.
Here, if the individual does not wish to shift to the NPS, then an exit is allowed. However, the entire amount is not always withdrawable.
If the corpus is more than Rs 2.5 lakh, then 80% of the corpus must be utilised for the purchase of annuity. The remaining 20% can be withdrawn as a lumpsum.
If the corpus is less than or equal to Rs 2.5 lakh, then the entire corpus can be withdrawn as a lump sum.
The minor will be the sole beneficiary of the scheme, but in the case of death the entire corpus would be returned to the guardian.
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