In 2024, the National Pension System (NPS) introduced a new initiative called NPS Vatsalya, specifically designed for minors. The Pension Fund Regulatory and Development Authority (PFRDA) is in charge of overseeing the NPS. This scheme was unveiled during the Union Budget for 2024-25 and aims to motivate parents to start saving early for their kids’ futures.
There’s a buzz that the government might roll out more announcements in the next budget that could spark greater interest in government savings plans, leading to increased investments. NPS Vatsalya is a government effort to assist parents in securing their children’s financial future. However, details about any tax benefits related to this new scheme are still unclear.
Will the government offer any tax relief for NPS Vatsalya?
As of now, the government hasn’t provided any tax benefits for this scheme. So, can we hope for some tax incentives in Budget 2025 to encourage parents to invest in NPS Vatsalya? We’d love to hear your thoughts on the possibility of tax benefits being announced for NPS Vatsalya in the upcoming budget.
Yeshu Sehgal, who leads the Tax Markets at AKM Global, mentioned that this budget should clarify the tax perks related to the new scheme aimed at ensuring financial security for kids under 18. While the Sukanya Samriddhi Yojana is specifically for girls, the NPS Vatsalya scheme is open to all, which might make it more appealing to parents. Additionally, legal guardians of orphans can also invest in this scheme on behalf of the children. Some tax incentives could really motivate parents to put their money into this program.
Kinjal Bhuta, Secretary of the Bombay Chartered Accountants Society (BCAS), pointed out that the NPS Vatsalya is a pension plan for minors under 18, launched in September 2024. As of now, there are no tax benefits under section 80CCD for this scheme since it came out after the July 2024 budget.
Given this situation, it’s anticipated that the government might think about offering tax benefits to parents to promote this new scheme, similar to the tax deductions available under section 80C for PPF investments, where parents can deduct contributions made to their child’s account.