Kolkata: The name NPS Vatsalya itself show cases the features of the product since it is a scheme that has been tailor-made to commence in the name of the child which is from the very first year that he/she is born. If one does it and if he/she starts putting in a little amount every year, it can culminate into a gigantic pool of money which the child can dip into at a later stage of life. This scheme was launched by Union finance minister Nirmala Sitharaman in September 2024 with a clear message from the government intent to encourage parents to adopt long term investments.

NPS Vatsalya is PPF accounts that allow a parent or legal guardian to open an account for the child while the child is still an infant. In fact, there is no minimum age of opening a PPF account. In both cases of NPS Vatsalya and PPF for minors, the child is required to take over the account as an adult (on turning 18). Let’s examine them on both instruments.

How does the NPS Vatsalya scheme work?

As per the National Pension System regulations, a child's account can also be opened by parents. For account registration, the following documents are required: Proof of identity and permanent address of the guardian in the form of Aadhaar card, passport, driver’s licenses, voter ID card, NREGA job card, and others; a document that proves the age of the child (birth certificate, etc.), a guardian’s signature and an application for a PAN for the guardian.

For a kid, the earlier one opens an NPS Vatsalya account, the better, as the more will be the eventual corpus. As an illustration, if for example one is able to deposit no more than Rs 1000 in an NPS Vatsalya funds for a child born in the first of January of 2025, the NPS Vatsalya calculator would show that when that child turns 60,the account will contain in the range of rs 4 crore and rs 40,000,000.

Is PPF favorable for Children under 18

Both parents can create separate PPF accounts for their children and also open them at any registered branch of banks or Indian post offices. Both parents and guardians need to provide KYC, as well as a legal documents wherein the child’s age is also XANR00, and also need to get a letter. The fee is at most Rs.500 and also provides a photograph of the parent who will be the custodian of the child.

To put everything in perspective, the calculator illustrates that if you invest Rs 1.5 lakh (which is the highest possible sum) into the PPF account once every year for 50 years the sum accumulated can be as high as Rs 6,75,75,988 out of which 6,00,75,988 will be labeled as interest while 75,00,000 will be counted as principal sum. The best part is that there is no risk of losing any form of money. For minors, this account’s interest also accumulates up to 7.5% which is the level of interest gained by adults with PPF accounts.