Having a source of income after retirement is necessary so that you can meet your lifestyle expenses even when you are not working. That is why many of you build up a retirement corpus for the golden years of your life. However, when it comes to the unorganized sector, i.e. the working poor, there is no earmarked corpus for retirement. The poor and backward class individuals need a retirement fund to help them lead a comfortable life after retirement. With this sentiment in mind, the Government of India launched the Atal Pension Yojana scheme in the Union Budget of the financial year 2015-16. This scheme overtook the Swavalamban scheme which existed earlier for creating a retirement pension for individuals. Let’s understand what the scheme is all about –
What is the Atal Pension Yojana scheme?
The Atal Pension Yojana scheme is a retirement oriented saving scheme which promises a fixed amount of pension to individuals after they retire. The scheme has been launched by the Government of India and it allows retirement savings for all types of individuals, particularly those belonging to the unorganized sector.
Features of Atal Pension Yojana
Here are the salient features of the Atal Pension Yojana (APY) scheme which you should know –
Eligibility criteria for opening an APY account
If you want to opt for Atal Pension Yojana, you would have to fulfil the below-mentioned eligibility criteria –
How to opt for Atal Pension Yojana?
You can subscribe to the Atal Pension Yojana scheme through any bank or post office with which you have a savings account. The APY account can be opened online through the net banking facility offered by your bank or through the website of India Post. You can also visit the branch of your bank or post-office with which you have a savings account, fill up the account opening form, submit your Aadhaar card copy and open the account. The process is simple, easy and quick. If you are an existing customer of the bank or have an existing account with the post-office, the application is verified and accepted at the earliest and you can start saving towards the Atal Pension Yojana scheme.
Contribution amount payable for Atal Pension Yojana
The amount of contribution that you need to pay depends on the following factors –
Here are the contribution rates at different combinations of the above-mentioned factors –
Age (in years) |
Guaranteed pension INR 1000 |
Guaranteed pension INR 2000 |
Guaranteed pension INR 3000 |
Guaranteed pension INR 4000 |
Guaranteed pension INR 5000 |
||||||||||
Contribution frequency |
Contribution frequency |
Contribution frequency |
Contribution frequency |
Contribution frequency |
|||||||||||
Monthly |
Quarterly |
Half-yearly |
Monthly |
Quarterly |
Half-yearly |
Monthly |
Quarterly |
Half-yearly |
Monthly |
Quarterly |
Half-yearly |
Monthly |
Quarterly |
Half-yearly |
|
18 |
42 |
125 |
248 |
84 |
250 |
496 |
126 |
376 |
744 |
168 |
501 |
991 |
210 |
626 |
1239 |
19 |
46 |
137 |
271 |
92 |
274 |
543 |
138 |
411 |
814 |
183 |
545 |
1080 |
228 |
679 |
1346 |
20 |
50 |
149 |
295 |
100 |
298 |
590 |
150 |
447 |
885 |
198 |
590 |
1169 |
248 |
739 |
1464 |
21 |
54 |
161 |
319 |
108 |
322 |
637 |
162 |
483 |
956 |
215 |
641 |
1269 |
269 |
802 |
1588 |
22 |
59 |
176 |
348 |
117 |
349 |
690 |
177 |
527 |
1045 |
234 |
697 |
1381 |
292 |
870 |
1726 |
23 |
64 |
191 |
378 |
127 |
378 |
749 |
192 |
572 |
1133 |
254 |
757 |
1499 |
318 |
948 |
1877 |
24 |
70 |
209 |
413 |
139 |
414 |
820 |
208 |
620 |
1228 |
277 |
826 |
1635 |
346 |
1031 |
2042 |
25 |
76 |
226 |
449 |
151 |
450 |
891 |
226 |
674 |
1334 |
301 |
897 |
1776 |
376 |
1121 |
2219 |
26 |
82 |
244 |
484 |
164 |
489 |
968 |
246 |
733 |
1452 |
327 |
975 |
1930 |
409 |
1219 |
2414 |
27 |
90 |
268 |
531 |
178 |
530 |
1050 |
262 |
799 |
1582 |
356 |
1061 |
2101 |
446 |
1329 |
2632 |
28 |
97 |
289 |
572 |
194 |
578 |
1145 |
292 |
870 |
1723 |
388 |
1156 |
2290 |
485 |
1445 |
2862 |
29 |
106 |
316 |
626 |
212 |
632 |
1251 |
318 |
948 |
1877 |
423 |
1261 |
2496 |
529 |
1577 |
3122 |
30 |
116 |
346 |
685 |
231 |
688 |
1363 |
347 |
1034 |
2048 |
462 |
1377 |
2727 |
577 |
1720 |
3405 |
31 |
126 |
376 |
744 |
252 |
751 |
1487 |
379 |
1129 |
2237 |
504 |
1502 |
2974 |
630 |
1878 |
3718 |
32 |
138 |
411 |
814 |
276 |
823 |
1629 |
414 |
1234 |
2443 |
551 |
1642 |
3252 |
689 |
2053 |
4066 |
33 |
151 |
450 |
891 |
302 |
900 |
1782 |
453 |
1350 |
2673 |
602 |
1794 |
3553 |
725 |
2241 |
4438 |
34 |
165 |
492 |
974 |
330 |
983 |
1948 |
495 |
1475 |
2921 |
659 |
1964 |
3889 |
824 |
2456 |
4863 |
35 |
181 |
539 |
1068 |
362 |
1079 |
2136 |
543 |
1618 |
3205 |
722 |
2152 |
4261 |
902 |
2688 |
5323 |
36 |
198 |
590 |
1169 |
396 |
1180 |
2337 |
594 |
1770 |
3506 |
792 |
2360 |
4674 |
990 |
2950 |
5843 |
37 |
218 |
650 |
1287 |
436 |
1299 |
2573 |
654 |
1949 |
3860 |
870 |
2593 |
5134 |
1087 |
3239 |
6415 |
38 |
240 |
715 |
1416 |
480 |
1430 |
2833 |
720 |
2146 |
4249 |
957 |
2852 |
5648 |
1196 |
3564 |
7058 |
39 |
264 |
787 |
1558 |
528 |
1574 |
3116 |
792 |
2360 |
4674 |
1054 |
3141 |
6220 |
1318 |
3928 |
7778 |
Premature exit from Atal Pension Yojana
Though the APY scheme matures when you attain 60 years of age, premature withdrawal is allowed in case of a terminal illness. In such cases, you can exit from the scheme and avail the corpus in a lump sum. Similarly, in case of death of the subscriber, the spouse is given two choices. One, the spouse can choose to terminate the scheme and receive the accumulated corpus in lump sum. Two, the spouse can choose to continue the scheme and then receive the guaranteed pensions. In the latter case, the scheme would continue till the date the subscriber would have attained 60 years of age had he/she been alive.
Discontinuation of contribution
Once you opt for the Atal Pension Yojana, you are required to contribute towards the scheme periodically till you reach 60 years of age and the scheme matures. However, if the contributions towards the scheme are stopped, you face a penalty. Moreover, in case of continued default, the account can also be terminated. So, let’s understand the consequences of discontinuing contributions during the tenure of the scheme –
Amount of contribution |
The applicable rate of penalty |
Up to INR 100/month |
INR 1/month |
INR 101 to INR 500/month |
INR 2/month |
INR 501 to INR 1000/month |
INR 5/month |
INR 1001/month and above |
INR 10/month |
Benefits of Atal Pension Yojana
The Atal Pension Yojana offers various benefits for its subscribers which have made the scheme popular. These benefits include the following –
The amount of pension that you can receive on the maturity of the scheme is guaranteed. Even if the corpus accumulated is not sufficient to cover the monthly pension, the Government would contribute the deficit amount. This ensures that the pension would be guaranteed and you can plan your retirement accordingly. Especially for the lower-income class individuals, a guaranteed pension would help them lead a comfortable retired life.
The contributions payable every month towards theAtal Pension Yojana scheme are quite affordable and thus, the scheme can be opened by all types of investors without worrying about affordability.
By subscribing to the Atal Pension Yojana scheme, you are mandated to save for your retirement in a disciplined manner. Since the APY account is linked with your bank account, the contribution is made through auto-debit facility thereby creating forced savings. These savings, then, accumulate into a considerable corpus which helps in funding your retirement.
If any subscriber is not already covered under a Statutory Social Security Scheme and is not a taxpayer, the Government proposed to contribute 50% of the subscriber’s contribution or INR 1000, whichever is lower, to the APY scheme along with the subscriber. This contribution was allowed for subscribers who subscribed to the scheme between 1st June 2015 and 31st December 2015 and the contribution was promised for five years up to financial year 2019-20. The contribution was mainly done to supplement the contribution of the lower classes and this contribution helped the poor create a good corpus to receive higher pensions.
The Atal Pension Yojana scheme is quite flexible in the sense that it allows you to increase or decrease the pension amount that you choose. This flexibility helps subscribers create the desired retirement corpus.
If the subscriber dies after the account has matured and a pension is being paid to him/her the pension would not stop. If the subscriber is survived by his/her spouse, the pension would continue to be paid till the spouse is alive. Moreover, if the spouse also dies, the remaining corpus would be paid to the nominee and the scheme would terminate. Thus the Atal Pension Yojana scheme not only creates retirement income, but it also promises a lump sum in case of death of the annuitant.
The Atal Pension Yojana scheme enjoys the same tax exemptions which are allowed to the National Pension System (NPS) scheme. Contributions to the APY scheme are allowed as a deduction under Section 80 CCD (1) up to INR 1.5 lakhs. Moreover, you can enjoy an additional deduction of up to INR 50,000 under Section 80 CCD (1B) thereby increasing the deduction limit to INR 2 lakhs. Thus, you can create a tax-saving retirement corpus by subscribing to the Atal Pension Yojana scheme.
Atal Pension Yojana tax exemption
As mentioned above, investments in the Atal Pension Yojana scheme qualify for a tax deduction. Let’s understand the detailed APY tax exemption which you can claim –
Investments into the Atal Pension Yojana scheme are allowed as a deduction under Section 80CCD (1). Salaried individuals can claim a maximum deduction of up to INR 1.5 lakhs by investing in the APY scheme in a financial year. Self-employed individuals can claim a deduction on investments of up to 20% of their annual income subject to a maximum of INR 1.5 lakhs. This means that if the annual income of a self-employed individual is INR 5 lakhs, the maximum tax-saving investment would be allowed for up to INR 1 lakh. If the individual invests INR 1.5 lakhs, INR 50,000 would be taxable. However, deduction under Section 80 CCD (1) is allowed together with the deduction under Section 80C and Section 80CCC. Thus, you can claim a maximum deduction of INR 1.5 lakhs under all these Sections combined.
Furthermore, the additional deduction can be claimed under Section 80 CCD (1B) on investment into the Atal Pension Yojana scheme. You can claim a deduction of up to INR 50,000 by investing in the scheme. This deduction is allowed in addition to the deduction of INR 1.5 lakhs available under Sections 80C, 80CCC and 80 CCD (1).
The pensions received under the Atal Pension Yojana scheme are considered to be a taxable income. These pensions would be added to your taxable income and would be taxed at your income tax slab rates.
The Atal Pension Yojana scheme is an attractive guaranteed pension scheme for everyone. Especially for low-income group people, this scheme can prove to be beneficial in giving them a guaranteed pension in their old age. You can also subscribe to the scheme if you want to create a retirement fund for yourself and seek guaranteed pension. The scheme is affordable and also tax-saving making it an ideal retirement planning tool.