As parents, our greatest wish is to see our children flourish. We save for their education, plan for their future, and dream of their success. However, in today’s fast-paced world, inflation often outruns traditional savings. This is why the Government of India has fortified its commitment to minor savings with the latest NPS Vatsalya Scheme Guidelines 2025.
Circular No. PFRDA/2026/02/NPS-Vatsalya/01: Following the recent notification on January 7, 2026, the Pension Fund Regulatory and Development Authority (PFRDA) has streamlined the rules to make this “financial sapling” even more robust. This circular officially supersedes earlier guidelines, bringing clarity to how your child’s wealth is managed, invested, and accessed.
What is the NPS Vatsalya Scheme?
Launched as a specialized extension of the National Pension System (NPS), NPS Vatsalya is a contributory pension scheme designed specifically for Indian minors (under 18 years of age). It allows parents or legal guardians to start building a retirement corpus for their children from the very day they are born.
The Modern “Digital Gulak”
Think of NPS Vatsalya as a high-growth version of the traditional gulak (piggy bank). Instead of coins sitting idle, the funds are professionally managed and invested in a mix of equities and debt, allowing them to compound over decades.
Key Features & Latest Rules (Circular PFRDA/2026/02/NPS-Vatsalya/01)
The new 2026 circular has introduced specific operational details that every parent should know:
- Eligibility: Open to all minor Indian citizens (including NRIs and OCIs).
- Minimum Contribution: You can start an account with just ₹250 (down from the earlier ₹1,000 threshold in some cases), making it accessible to everyone.
- PRAN for Life: Every child is issued a Permanent Retirement Account Number (PRAN), which stays with them even after they become adults.
- Specific Purpose Classification: The 2025 guidelines officially classify this as a “Specific Purpose Scheme,” enabling customized withdrawal and exit rules for children.
Investment Options: Choosing Your Growth Path
Under the new guidelines, guardians have the flexibility to allocate funds across four asset classes: Government Securities, Corporate Debt, Equity, and Short-term Debt.
1. Auto Choice (Lifecycle Funds)
If you prefer a “set it and forget it” approach, the system automatically adjusts the risk based on the child’s age.
- Aggressive (LC-75): Up to 75% in equity.
- Moderate (LC-50): 50% in equity (Default).
- Conservative (LC-25): 25% in equity.
2. Active Choice
For those who want more control, you can decide the exact percentage:
- Equity (Asset Class E): Up to 75% for high growth.
- Govt Securities (Asset Class G): Up to 100% for maximum safety.
- Corporate Debt (Asset Class C): Up to 100% for stable returns.
Withdrawal Rules: Accessing Funds for Your Child’s Needs
The 2025 Guidelines were clarified by Circular No. PFRDA/2026/02/NPS-Vatsalya/01 provides a clear roadmap for partial withdrawals to ensure the money is available when it matters most:
- Waiting Period: You can make your first partial withdrawal after 3 years from account opening.
- Limit: Up to 25% of the guardian’s contributions (excluding the interest earned) can be withdrawn.
- Permitted Reasons: * Higher education for the minor.
- Treatment of specified critical illnesses.
- Disability of more than 75%.
- Frequency: You can make a maximum of two partial withdrawals before the child turns 18. An additional two withdrawals are permitted between the ages of 18 and 21.
What Happens When Your Child Turns 18?
The transition is seamless but requires action. Within three months of the child’s 18th birthday:
- Fresh KYC: The “minor” is now a “major” and must complete a fresh KYC process.
- Account Shift: The account can be shifted to the All Citizen Model of NPS.
- Continuation: If no choice is made by age 21, the account automatically shifts to a high-risk equity pension fund under the Multiple Schemes Framework.
- Exit Option: If you choose to exit at 18 and the corpus exceeds ₹8 lakh, 80% must be used to purchase an annuity (monthly pension), and 20% may be taken as cash. If the total corpus is below ₹8 lakh, the entire amount can be withdrawn as a lump sum.
NPS Vatsalya vs. Sukanya Samriddhi Yojana (SSY)
| Feature | NPS Vatsalya | Sukanya Samriddhi (SSY) |
| Gender | Boys and Girls | Girls Only |
| Returns | Market-linked (Equity/Debt) | Fixed (Decided by Govt) |
| Max Limit | No Upper Limit | ₹1.5 Lakh per year |
| Flexibility | High (Choice of funds) | Low (Fixed structure) |
| Target Goal | Long-term Wealth/Retirement | Education/Marriage |
How to Open an NPS Vatsalya Account
Opening an account is now digitally driven and straightforward:
- eNPS Portal: Visit the official NPS Trust or CRA websites (NSDL/Karvy/CAMS).
- Points of Presence (PoPs): Major banks like SBI, HDFC, ICICI, and Axis, as well as Post Offices, are authorized to open these accounts.
- Documents Needed: Birth certificate/Passport of the minor, and Aadhaar/PAN of the guardian.
Final Words
The NPS Vatsalya Scheme, strengthened by the latest PFRDA Circular No. PFRDA/2026/02/NPS-Vatsalya/01 is a landmark shift in how Indian families can plan for their children’s financial independence. By starting with as little as ₹250, you are not just saving; you are ensuring that, decades from now, when your child is ready to retire, they have a “wealth fortress” built on the foundation of compounding.
Frequently Asked Questions (FAQs)
1. Can I open an NPS Vatsalya account for my son? Yes, unlike SSY, NPS Vatsalya is open to both boys and girls.
2. What if the guardian passes away? In the event of the guardian’s death, a new guardian can be appointed through a new KYC process. If both parents pass away, a legal guardian can maintain the account without further contributions until the child turns 18.
3. Are there any tax benefits? Yes, contributions are eligible for deductions under Section 80C (up to ₹1.5L) and an additional ₹50,000 under Section 80CCD(1B) in the Old Tax Regime.
Recommended Readings
- Circular No. PFRDA/2026/02/NPS-Vatsalya/01 Source: PFRDA | Link
- NPS Vatsalya: Operational Guidelines 2025-26 Source: NPS Trust | Link
- How to choose between NPS Vatsalya and SSY Source: ClearTax | Link
- Withdrawal and Exit Rules for Minors in NPS Source: Outlook Money | Link
- NPS Tier-1 vs NPS Vatsalya: What’s the difference? Source: ET Wealth | Link
Disclaimer
The information provided in this blog is for educational and informational purposes only. Please consult a qualified financial advisor before making investment decisions.
VSJ FinMart is an AMFI-registered Mutual Fund Distributor (MFD) and does not offer investment advisory services. Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing.