If you are planning to invest for the bright future of your children, you now have two solid government schemes — NPS Vatsalya and Sukanya Samriddhi Yojana (SSY). One is a pension-focused scheme and the other is a safe savings scheme. Both schemes have different benefits, but which one is better for you? Know the complete comparison and latest rules.

What is NPS Vatsalya Yojana?

Announced in the budget for FY 2024–25, NPS Vatsalya is a long-term retirement-focused investment scheme for children. The scheme is operated by the Pension Fund Regulatory and Development Authority (PFRDA). This account can be opened in the name of a child below 18 years of age. It is necessary to deposit a minimum of Rs 1,000 every year, and there is no maximum limit.

In this scheme, money is invested in asset classes like equity and debt, which can give an average return of 9.5% to 10% in the long term. After completion of 3 years, there is a facility of withdrawal of up to 25% in education or emergency. Also, for tax exemption, in addition to section 80C, an additional deduction of Rs 50,000 is available under 80CCD (1B).

Also read: Sukanya Samriddhi Yojana to Mutual Fund SIP, best investment options for your child

Special features of Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana (SSY) is especially for daughters. In this, an account can be opened till the girl child is 10 years old. Deposits can be made for a maximum period of 15 years and the scheme remains active for 21 years. Currently, this scheme is giving 8.2% annual interest, which is decided by the central government every quarter.

An investment of Rs 250 to Rs 1.5 lakh can be made annually in this scheme. SSY is completely tax free — investment, interest and maturity amount all come under the EEE tax category. Up to 50% can be withdrawn after the age of 18 or completion of 10th class, and the entire amount is available after 21 years or on marriage (after the age of 18).

Which scheme is better for you?

Experts believe that if your goal is to create a fixed and secure fund for your daughter’s education or marriage, then Sukanya Samriddhi Yojana is a reliable option. On the other hand, if you want to make long-term investments and create a pension or retirement corpus for children in the future, then NPS Vatsalya offers more flexibility and the possibility of better returns.

Also read: Looking to save tax? Here’s how NPS Vatsalya can help

Features NPS Vatsalya Sukanya Samriddhi Yojana

Investment objective Retirement/long-term savings Saving for education and marriage

Interest/return Market linked (9.5–10%) Fixed 8.2% (government rate)

Tax benefits 80C + 80CCD(1B) Fully EEE (tax free)

Withdrawal rules 25% withdrawal possible after 3 years 50% after 18 years or 10th

Eligibility Boy or girl (0–18 years) Girl only (0–10 years)

Summing up:

If you are planning an investment for both your son and daughter, NPS Vatsalya is a new-age fund option that offers the benefits of market power along with pension. On the other hand, if you want safe and tax-free savings only for your daughter, Sukanya Samriddhi Yojana is still a very reliable scheme.

Both the schemes cater to different needs. It is wise to choose the right option keeping in mind your investment objective, time horizon and tax planning – or if necessary, use a balanced combination of both the schemes.