Atal Pension Yojana: Meaning, Features, and Benefits

Atal Pension Yojana (APY) is a government-backed pension scheme specifically targeted for people from the unorganised sector and informal workers. The scheme aims to encourage the workers in the unorganised sector to save for retirement. Read on to find out more about the Atal Pension Yojana, its features, benefits, and eligibility criteria.

What is Atal Pension Yojana (APY)?

The government launched the Atal Pension Yojana with the aim of creating social security for all Indians, especially the poor, underprivileged, and unorganised sectors. With this scheme, the government aims to ensure that no Indian citizen has to worry about money when they retire.

How Does Atal Pension Yojana (APY) Work?

APY is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), is open to all citizens aged 18-40, and pays a guaranteed pension when the subscriber turns 60. In this scheme, the subscriber pays a monthly contribution to get a fixed monthly pension upon turning 60. The pension amount is fixed at Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 or Rs 5,000 per month. The amount of pension depends on the contribution made.

The minimum contribution is Rs 42 and can go up to Rs 1,500 monthly based on the subscriber’s age. The contributions can be made monthly, quarterly, or half-yearly through the auto-debit facility. The amount of contribution you make isn’t static and can increase over time based on your income. If you fail to pay your contribution on time, you will have to pay a penalty. The penalty depends on the contribution amount and is given in the table below.

When you turn 60, you have the option to purchase an annuity plan with the entire corpus to receive a monthly pension after closing the APY account with your bank. You can only withdraw your money prematurely if you are suffering from a terminal illness.

Objectives of Atal Pension Yojana (APY)

The following are the objectives of Atal Pension Yojana.

• The scheme is aimed at the unorganised sector
• To pay a lumpsum amount to the subscriber for the retirement benefit. In case of the death of the subscriber, the spouse will receive the retirement benefit, and if both the subscriber and the spouse are deceased, the nominee will receive the retirement benefit in lumpsum.

Features and Benefits of Atal Pension Yojana (APY)

The following are the features and benefits of the Atal Pension Yojana:

Deposits

The minimum investment amounts vary based on the investor’s age and chosen pension plan. The minimum contribution is Rs 42 and can go up to Rs 1,500 monthly based on the subscriber’s age.

For instance, a 25-year-old subscriber aiming for a monthly pension of Rs. 3,000 after retirement must contribute Rs. 347 per month.

Additionally, the investor’s age and selected pension plan determine the maximum investment limit.

Maturity Period 

Under the APY scheme, the pension will be paid only when you turn 60. The investment tenure is different for each individual depending on when they first invest in the scheme. For instance, a 45-year-old individual has a maturity tenure of 15 years (60-45), while a 30-year-old has a maturity tenure of 30 years (60-30).

Tax Benefits

Investments made in Atal Pension Yojana are eligible for tax exemption under Section 80CCD of the Income Tax Act, 1961, specifically under Section 80CCD (1). The maximum exemption allowed is 10% of the individual’s gross total income, with a limit of INR 1,50,000. Additionally, an extra exemption of INR 50,000 is available under Section 80CCD (1B).

The pension amount is taxable at the applicable income tax slab rates.

It is important to note that this tax exemption is available only if you opt for the old tax regime. No tax deductions are available under the new tax regime (announced in Budget 2023).

Premature and Partial Withdrawals

The Atal Pension Yojana does not allow premature withdrawals. However, in case of the account holder’s untimely death or terminal illness, they can withdraw their investment prematurely.

In case of the account holder’s death, the account holder’s spouse can claim a pension. The nominee is also eligible to receive the benefits of the Atal Pension Scheme.

Account Transfer

APY are transferable between banks and bank branches. Upon request, the APY account can be transferred from:

• one branch to another (within the same bank) or,
• one branch of a bank to a branch of another bank.

Monthly Contribution for Atal Pension Yojana

The monthly contribution you will have to make will depend on your age and your desired amount of pension. The following table shows the monthly contribution based on the age and pension amount.

Eligibility

The following is the eligibility criteria for the Atal Pension Yojana.

• All Indian citizens aged between 18 and 40 years.
• Individuals who have a valid savings account linked to Aadhar.
• Individuals who have a mobile number will be able to subscribe to the scheme.
• Should make contributions for a minimum of 20 years.

How to Invest in Atal Pension Yojana (APY)?

You can invest in APY through all nationalised banks, making it convenient to open an APY account by visiting the nearest branch. You can open the account online or offline. The following steps outline the process of investing in the Atal Pension Yojana:

• Duly fill and submit the APY registration form at the nearest bank branch, available both in-person and online. The forms are accessible in multiple languages, including English, Hindi, Telugu, Tamil, Kannada, Bangla, Gujarati, Marathi, and Odia.
• Provide essential information such as a mobile number, bank account number, and Aadhaar number.
• Submit a photocopy of the Aadhaar card along with the application.
• The initial contribution will be deducted from the linked bank account at the time of account opening.
• The bank will issue an acknowledgement number or a Permanent Retirement Account Number (PRAN).
• Subsequent monthly contributions will be automatically debited from the linked bank account.
• Upon approval of the application, a confirmation message will be sent to the registered mobile number.

Documents Required for Opening APY Account

The following are the documents required for opening an APY account:

• Active savings bank account (account details)
• Duly filled APY registration form
• Identity proof – Aadhaar card
• Address proof – Voter ID card, Utility bills, Aadhaar card, etc.

Conclusion

The Atal Pension Yojana is a useful investment for people in the unorganised or private sector. It will help them secure their financial future post-retirement. The scheme is also suitable for individuals with a low-risk tolerance and who want to earn a fixed income. However, the scheme has certain limitations. The contribution must be made for at least 20 years, and the pension will be paid only when you turn 60. Hence, it is best to invest in this scheme only for retirement.

Frequently Asked Questions (FAQs)

Can an employee of the Central/ State Government or Public Sector Undertaking subscribe to APY?

Yes, an employee of the Central/State Government or Public Sector Undertaking can subscribe to APY.

Can I open an APY Account without a savings bank account?

No, you cannot open an APY account without a savings bank account. The monthly contributions are auto-debited from the linked savings bank account.

Do I need to add a nominee at the time of joining the APY scheme?

Yes, you must add a nominee when opening the APY account. You can edit the nominee details at any time.

Can I hold more than one APY account?

No, you cannot hold more than one APY account.

I am 40 years old. Can I join the Atal Pension Yojana?

You cannot join APY if you are more than 40 years old. You can join APY only if you are in the age group of 18 years to 39 years 364 days.

Can an NPS subscriber subscribe to APY?

Yes, existing NPS subscribers can also subscribe to APY.

Is migration from the NPS Lite/ Swavalamban Scheme to APY possible?

Yes, however, subscribers between 18 to 40 years of age are eligible to migrate to APY.

What are the charges for late payment of APY?

You will have to pay:

• Re. 1 for missing a monthly contribution of Rs. 100
• Rs. 2 for missing a contribution of Rs. 101 to 500
• Rs. 5 for missing a contribution of Rs. 501 to Rs. 1,000
• Rs. 10 for missing a contribution worth more than Rs. 1,000.