Government-Backed Schemes for Children: Parents who want to save money for a child often look at government-backed plans first. These are usually steady and low-risk. In India, four names often come up for this kind of saving
- National Savings Certificate
- Sukanya Samriddhi Yojana
- Public Provident Fund
- NPS Vatsalya.
1. National Savings Certificate
The National Savings Certificate, or NSC, is a 5-year plan from India Post. Right now it gives 7.7% interest. The minimum deposit is Rs 1,000, there is no upper limit, and an adult can open it for a minor child too. It is a simple locked savings plan, so the money stays put until maturity.
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2. Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana, or SSY, is only for a girl child. The account can be opened until the girl turns 10 years old. The minimum deposit is Rs 250 in a financial year, and the maximum is Rs 1.5 lakh. The current interest rate is 8.2%. The account matures after 21 years from opening, and the rules also allow withdrawal for higher education and early closure after marriage once the girl is 18 or older. The interest and maturity amount are tax-free under the scheme rules.
3. Public Provident Fund (PPF)for a minor
PPF is another long-term plan that many families like because it is calm and steady. A resident individual can open it in their own name or in the name of a minor child for whom they are the guardian. The current interest rate is 7.1%. The yearly deposit must be at least Rs 500 and cannot go above Rs 1.5 lakh. The account matures after 15 complete financial years, and after that it can be extended in blocks of 5 years. The interest earned and the maturity amount are tax-free under the scheme rules.
4. NPS Vatsalya for a child’s long run
NPS Vatsalya is made for children under 18. The account is opened and run by a guardian for the child’s benefit. The guardian can open one account per child, and the minimum contribution is Rs 1,000 a year.
There is no upper limit. The money is invested under NPS choices and can be split across different fund types, so the return is not fixed like PPF or NSC. Partial withdrawal is allowed after 3 years for things like education or treatment, and up to 25% of contributions can be taken out in such cases. When the child turns 18, the account can continue under NPS rules.
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For tax, the Income Tax Department says a parent or guardian can get an extra deduction of up to Rs 50,000 under Section 80CCD(1B) for contribution to a minor child’s NPS Vatsalya account. The department also says that 115BAC, the new tax regime, restricts many Chapter VI-A deductions, while the old-style deduction system still covers Section 80C plans like PPF, NSC, and SSY.
