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Context:

• Govt introduces pension scheme for minor children in Union Budget 2024.

NPS Vatsalya

• It is a new pension scheme under the National Pension Scheme (NPS).
• It is a financial plan that caters to the minor children's parents and guardians.
• Under this scheme, parents and guardians can open an NPS account for their children and contribute an amount every month or year till the child reaches 18 years.

Benefits of NPS Vatsalya Scheme

Early Savings Habits:

• Encourages parents for children to start saving and investing early in life and imparts a habit of financial discipline from a young age.

Long-term Accumulation:

• Contributions start early when the child is a minor and allows for significant accumulation over several decades until retirement age.

Conversion to Standard NPS:

• When the child turns 18, the account converts to a standard NPS account and an independent management and contributions.

Portability:

• Offers flexibility, allowing the account holder to switch jobs without affecting the NPS account.

Retirement Corpus:

• Builds a substantial retirement corpus over time, providing financial security during retirement years. At retirement, one can withdraw a portion (60%) and allocate the rest (40%) to an annuity for regular income.

Financial Education:

• Promotes responsible financial management and educates children about savings and investment strategies early on.

Family Financial Security:

• Provides a systematic approach for families to secure their children's financial future, contributing to overall financial stability.

Lifetime Benefit:

• The NPS account can be continued throughout the account holder's life, ensuring sustained financial planning and security well into retirement.

Changes in NPS as proposed in Union budget 2024

• Government has also increased the National Pension Scheme limit for employers in the private sector from 10 per cent to 14 percent of the employee's salary.
• To improve social security benefits, deduction of expenditure by employers towards NPS is proposed to be increased from 10 to 14 percent of the employee’s salary.
• Similarly, deduction of this expenditure up to 14 percent 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," said the FM, in her Budget Speech.

All about NPS and its eligibility ●The Central Government has introduced NPS for individuals to save a part of their income which can later be transformed into a pension and fulfil their retirement needs. ●A citizen of India, either a resident, non-resident or an Overseas Citizen of India, can open an NPS account. ●An individual can also claim tax benefits after making an investment in the NPS under Sec 80 CCD (1) within the overall ceiling of Rs. 1.5 lac under Sec 80CCC. ●Under subsection 80CCD (1B), NPS subscribers can also claim an additional deduction for investments up to Rs. 50,000 in NPS (Tier I). This deduction is over and above Rs. 1.5 lakh tax exemption under section 80C of the Income Tax Act 1961. You may read about the NPS in detail here: https://www.iasgyan.in/daily-current-affairs/national-pension-system

Important articles for reference :

National Human RIghts Commission

International Human Rights Treaty

Sources:

• https://www.wionews.com/india-news/union-budget-2024-govt-introduces-pension-scheme-for-minor-children-know-what-is-nps-vatsalya-743409

PRACTICE QUESTION Q. Consider the following statements regarding the Mission Vatsalya recently seen in news: It is a new pension scheme under the National Pension Scheme (NPS). It is a financial plan for women above 18 years of age. Contribution to the scheme can be made every month or every year by the beneficiary. Which of the above statements is/are correct? A.1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1 ,2 and 3 Answer: A