NPS Vatsalya Calculator: The NPS Vatsalya Scheme is an excellent option for securing the future of children in the country. This scheme is beneficial for parents with long-term investments. If regular investments are started in a child’s name, small amounts can build a corpus of crores of rupees over time. For example, a monthly deposit of ₹5,000 can create a corpus of approximately ₹20 crore by the age of 60.
What is the NPS Vatsalya Scheme?
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The NPS Vatsalya Scheme is a government scheme launched under the National Pension System (NPS) for minor children in India (below 18 years of age). Its purpose is to ensure long-term retirement savings for children. Parents or legal guardians can open an account in their children’s name and deposit funds into it. This account converts to a standard Tier-1 NPS account when the child turns 18. Investing in this scheme provides market-linked growth and tax benefits.
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Features of the NPS Vatsalya Scheme
An account can be opened under this scheme for any Indian child under the age of 18. It is managed by the parent or guardian. The minimum investment is only ₹1,000 per year, with no maximum limit. It is managed by the Pension Fund Regulatory and Development Authority (PFRDA). Investments can be made in various investment options, including equities, government securities, corporate debt, and alternative assets. Upon the child turning 18, the account converts to a Tier-1 account, requiring fresh KYC. There is also an option to receive an annuity or a lump sum. The investment also qualifies for tax deductions under Section 80CCD(1B).
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Investment Initiation and Calculation
The NPS Vatsalya account can be opened at the time of a child’s birth. If opened in the first year, it can be maintained until the child reaches the age of 60. According to the NPS Vatsalya calculator, if an account is opened when the child is 1 year old and ₹5,000 is deposited every month, the fund will grow to approximately ₹20 crore by the age of 60. This calculation assumes an average return of 10%.
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By the time the child turns 18, approximately ₹30 lakh will have accumulated in the account. ₹2.5 lakh can be withdrawn from that time. If this money is not withdrawn and spent, the fund will exceed ₹20 crore by the age of 60.
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How to Grow the Fund
By investing ₹5,000 per month in this government scheme, compounded at 5% annually, the fund will reach approximately ₹41 lakh by the child’s age 18. At the same time, this fund can grow to ₹90 crore by the child’s age 60. This clearly demonstrates that long-term investing plays a crucial role in ensuring a child’s future is financially secure.