As part of the Budget for 2025-26, Finance Minister Nirmala Sitharaman announced that contributions of up to Rs 50,000 per year towards the NPS Vatsalya scheme, a children's welfare scheme, will be eligible for tax exemption. This move aims to make the scheme more appealing, with the tax benefits also available to regular NPS accounts. The number of enrolments in the scheme is expected to increase with this announcement, providing a secure and prosperous financial future for minors.
Tax Exemption for NPS Vatsalya Scheme: Empowering Children's Financial Future
Background:
The National Pension System (NPS) is a government-sponsored retirement savings scheme in India. NPS Vatsalya is a sub-scheme of NPS specifically designed for children's welfare. Launched in 2017, it aims to provide a long-term investment option for parents and guardians to secure their children's financial future.
Budget Announcement 2025-26:
As part of the Union Budget 2025-26, Finance Minister Nirmala Sitharaman announced a significant tax exemption for contributions made to the NPS Vatsalya scheme. Effective immediately, contributions of up to Rs 50,000 per year will be eligible for tax exemption under Section 80CCD(1B).
Benefits of the Tax Exemption:
FAQs:
Q1. Who is eligible to contribute to NPS Vatsalya? A1. Parents, grandparents, or legal guardians of children under 18 years of age are eligible to contribute.
Q2. How is the NPS Vatsalya scheme different from regular NPS accounts? A2. NPS Vatsalya is specifically designed for children and offers higher contribution limits and lower investment options to suit their risk profile.
Q3. What are the tax benefits of NPS Vatsalya? A3. Contributions of up to Rs 50,000 per year are eligible for tax exemption under Section 80CCD(1B).
Q4. What is the minimum contribution required for NPS Vatsalya? A4. The minimum annual contribution is Rs 1,000.
Q5. When will the tax benefits of NPS Vatsalya be available? A5. The tax exemption announced in Budget 2025-26 is effective immediately for contributions made starting April 1, 2025.
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