Budget 2025 extends tax benefits to NPS Vatsalya under section 80CCD(1B)

NPS Vatsalya is a retirement plan for minor children, allowing parents or guardians make investments on their behalf

Subscribers of pension scheme NPS Vatsalya will receive the same tax benefits as regular NPS for their contributions under Section 80CCD(1B), said Finance Minister Nirmala Sitharaman in her Budget 2025 speech on Saturday.

 

“It is proposed to extend the tax benefits available to the National Pension Scheme (NPS) under sub-section (1B) of section 80CCD of the Income-tax Act, 1961 to the contributions made to the NPS Vatsalya accounts, as applicable,” she said. 

 

Alay Razvi, managing partner at Accord Juris, said: “With the introduction of tax benefits under section 80CCD of Income Tax Act in this Union Budget 2025 could make the scheme more attractive to parents.”

 

 

What is the NPS?

 

NPS is a government initiative ensuring steady income after retirement for its participants. It was launched in January 1 2004, primarily for new government recruits. On May 1, 2009, the NPS was extended to all Indian citizens on a voluntary basis, including workers in the unorganised sector. 

 

What is NPS Vatsalya scheme

 

The NPS Vatsalya scheme, introduced in September 2024, helps parents plan their children's financial security. No specific tax benefits were announced for this scheme at the launch of the scheme.

 

NPS Vatsalya is to foster early retirement savings habits and ensure long-term financial security. It allows parents to open accounts for their children and contribute to their retirement savings, encouraging a habit of disciplined saving from a young age.