If you are a parent looking to give your child a head start in their financial journey, having a well-defined investment plan and choosing suitable savings options can be crucial. Starting early provides a longer investment horizon, allowing savings and investments more time to grow and compound over the years.
Several government-backed investment schemes are available for parents looking to build a corpus for their children. These options are designed to support long-term financial planning with assured and safe returns. Additionally, some schemes may also come with tax benefits. Here are four investment options that parents can consider for their minor child.
National Savings Certificate (NSC)
The National Savings Certificate () remains a premier secure investment vehicle offered through India Post. The scheme is designed primarily for individuals and Hindu Undivided Families (HUFs).
A NSC account can be opened by an adult for themselves or on behalf of a minor (under 18 years of age). Minors who are 10 years or older can also open an account. The scheme currently offers an interest rate of 7.7% per annum, which is revised quarterly by the Ministry of Finance.
Key Specifications of the scheme:
- Investment limit: Rs. 1,000 (with no maximum limit).
- Lock-in Period: 5 years. There is no provision to extend it.
- Risk Profile: Sovereign guarantee (zero market risk).
- Tax Benefit: Under the Income Tax Act, 2025, the traditional Section 80C has been restructured. Taxpayers filing under the old tax regime can now claim deductions of up to Rs. 1.5 lakh under Section 123 (read with Schedule XV).
For the first four years, the interest earned is automatically reinvested into the scheme. This reinvested interest is considered a “fresh investment” and qualifies for a tax deduction under Section 123 for that year. However, the interest accrued in the fifth (final) year is not reinvested and is therefore taxable according to the investor’s applicable income tax slab.
Sukanya Samriddhi Yojana (SSY)
is meants to secure the future of a girl child. As per the scheme’s rules, the parents or legal guardian of the child can open an account. Once the girl turns 18 years old, she can take control of the account by submitting a few documents.
The scheme currently offers a competitive interest rate of 8.1%, which is the highest among small savings schemes.
Key Specifications of the scheme:
- Investment limit: The minimum annual contribution is ₹250 and the maximum contribution is ₹1.5 Lak in a financial year.
- Lock-in Period: 21 years or upon the child’s marriage (when she turns 18 years old), whichever occurs first.
- Risk Profile: Sovereign guarantee (zero market risk).
- Tax Benefit: The scheme falls under the EEE (Exempt-Exempt-Exempt) tax category, meaning an investor can claim income tax benefits on up to ₹1.50 lakh invested in an SSY account in the single financial year under Section 80C of the Income Tax Act. The interest generated each year is tax-free and the final withdrawal amount upon maturity is also entirely tax-free.
Public Provident Fund (PPF)
Public Provident Fund (PPF) is a popular low-risk investment option for the long term. Any Indian resident can start investing in PPF. For children or minor applicants, a parent or guardian can open a joint PPF account which can be converted once the account holder turns 18 years old.
The current Public Provident Fund () interest rate is 7.1% per annum, which is revised on a quarterly basis as well.
Key Specifications of the scheme:
- Investment limit: The minimum deposit for is ₹500 per financial year. The maximum you can invest is ₹1.5 lakh per financial year.
- Lock-in Period: 15 years. It can be extended in blocks of five years, as many times as you want. The extension can be done with or without contributions to the account.
- Risk Profile: Sovereign guarantee (zero market risk).
- Tax Benefit: The scheme falls under the EEE (Exempt-Exempt-Exempt) tax category, meaning an investor can claim income tax benefits on up to ₹1.50 lakh invested in an SSY account in the single financial year under Section 80C of the Income Tax Act. The interest generated each year is tax-free and the final withdrawal amount upon maturity is also entirely tax-free.
National Pension System Vatsalya
NPS Vatsalya is exclusively meant for minors, allowing parents to secure their child’s financial future. It is regulated and administered by the Pension Fund Regulatory Authority of India (PFRDA) and gives interest between 9.5% to 10%.
Key Specifications of the scheme:
- Investment limit: The minimum contribution is ₹1,000 per annum with no upper limit on the maximum contribution.
- Lock-in Period: The scheme comes with a mandatory lock-in period of 3 years from the date of account opening.
- Risk Profile: Sovereign guarantee (zero market risk).
- Tax Benefit: Contribution of up to ₹1.5 lakh made to NPS Vatsalya are exempt for the parent / guardian under Section 80CCD(1B) of the Income Tax Act, 1961. The parents or guardian can also claim further ₹50,000 deduction.