Earnings Tax Advantages in NPS Vatsalya Scheme


Final Up to date on February 1, 2025 at 3:32 pm

NPS Vatsalya is a contributory pension scheme regulated and administered by the PFRDA for all minor Indian residents. Identical to PPF, the account will likely be opened within the identify of the minor and operated by Guardian with the minor as the only beneficiary.

Learn our earlier evaluate: What you have to know earlier than contemplating NPS Vatsalya

From 1st April 2025 onwards,  advantages out there to the Nationwide Pension Scheme (NPS) underneath Part 80CCD of the Act are additionally out there to the contributions made to the NPS Vatsalya accounts:

(I) A deduction to be allowed to the mother or father/guardian’s whole revenue of the quantity paid or deposited within the account of any minor underneath the NPS to a most of Rs 50,000/- total as mandated underneath sub-section (1B) of part 80CCD; My understanding is that this contains self+ Vatsalya contributions. Notice: This contribution is just not legitimate within the new tax regime!

(II) The quantity on which deduction has been allowed underneath sub-section (1B) of part 80CCD or any quantity accrued thereon, will likely be charged to tax when such quantity is withdrawn, within the case the place the deposit was made within the account of a minor; and

(III) The quantity on which deduction has been allowed and is obtained on the closure of the account as a result of loss of life of the minor shall not be deemed to be the revenue of the mother or father/guardian;

Any withdrawal from the NPS Vatsalya Scheme (as a consequence of contingency conditions like training, remedy of specified sicknesses and incapacity) that’s lower than or equal to 25% of whole contributions made by the guardian shall not be included within the whole revenue of the mother or father/guardian.

Our take: Cease making funding choices based mostly on taxation or tax deductions and deal with constructing wealth. NPS Vatsalya is just not mandatory.

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