NPS Vatsalya contribution to get tax benefit up to Rs 50,000

New Delhi, Feb 1 (PTI) To make NPS Vatsalya more attractive, Finance Minister Nirmala Sitharman on Saturday proposed tax exemption for contribution up to Rs 50,000 per year under the scheme.

"I am also proposing to allow similar treatment to NPS Vatsalya accounts as is available to normal NPS accounts, subject to overall limits," she said while presenting Budget 2025-26 in Lok Sabha.

However, the tax benefit would be availed by those who opt for old tax regime.

NPS-Vatsalya scheme, announced in the Union Budget 2024-25 as a plan that allows parents and guardians to contribute to minors' accounts, was launched on September 18, 2024.

A total of 89,475 subscribers have joined the scheme with Assets Under Management (AUM) of 61.98 crore. The enrolments under the Scheme would further increase with the tax exemptions allowed in the Budget.

Parents can subscribe to NPS Vatsalya online or visiting a bank or post office. The minimum contribution to open Vatsalya account is Rs 1,000. Subscribers will have to contribute Rs 1,000 annually thereafter.

Under the NPS Vatsalya scheme, all minor citizens up to the age of 18 are eligible to open an account. The account is opened in the name of the minor and managed by their guardian until the child reaches adulthood, ensuring that the minor remains the sole beneficiary throughout the process.

Upon reaching adulthood, the account can be seamlessly converted into a regular NPS account or another non-NPS scheme.

With the promise of substantial wealth accumulation through the power of compounding, NPS Vatsalya envisions providing a dignified and secure financial future for its subscribers, aligning with the government’s commitment to comprehensive financial well-being.

With regard to Kisan Credit Cards (KCC), the Budget has enhanced the limit to Rs 5 lakh.

"KCC facilitate short term loans for 7.7 crore farmers, fishermen, and dairy farmers. The loan limit under the Modified Interest Subvention Scheme will be enhanced from Rs 3 lakh to Rs 5 lakh for loans taken through the KCC," she said.

Modified Interest Subvention Scheme (MISS) was launched in 2022 with interest subvention of 1.5 per cent for providing short-term agri loans availed through KCC up to Rs 3 lakh at a concessional interest rate of 7 per cent per annum.

An additional interest subvention of 3 per cent is provided to farmers on prompt repayment of loans, which effectively reduces the rate of interest to 4 per cent for farmers.

She also announced NaBFID will set up a ‘Partial Credit Enhancement Facility’ for corporate bonds for infrastructure. PTI DP MR

Source: PTI