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In this blog, we will discuss the Atal Pension Yojana. Atal Pension Yojana is a pension plan focused on providing pensions to those working in the unorganized sector, including a portion of the country’s labor force. Primary goal of the Atal Pension Yojana is to provide financial security, especially to senior citizens and underprivileged individuals.
The scheme guarantees a pension upon retirement or policy maturity. The central government initiated the Atal Pension Yojana in June 2015 targeting underprivileged and unorganized sector workers. However, any Indian citizen can register for this scheme and after reaching the age of 60, they can receive a monthly pension ranging from ₹1000 to ₹5000.
Pension Fund Regulatory and Development Authority operates this scheme within the framework of the National Pension Scheme. As of May 2023, the scheme has attracted more than 5.25 crore subscribers. According to the report of May 2023, the number of subscribers in this scheme increased by 20% compared to FY22 showing a positive trend in FY23.
Contribution to APY by Subscriber
Let’s take an example to explain how much money you need to contribute to an APY account. If you open an account at the age of 18, choose a pension slab of ₹1000 and select a monthly contribution frequency, you’ll need to deposit ₹42 every month. On the other hand, if you open the account at the age of 19, the monthly contribution would be ₹46. By contributing regularly until the age of 60, the corpus for your nominee could accumulate up to ₹1.7 lakh.
APY Monthly Contribution Chart
The chart below outlines the monthly contribution required for the Atal Pension Yojana (APY) based on entry age and desired monthly pension amount. Please note that actual contribution amounts may vary.
APY Features
Joining Eligibility
To enroll in this scheme, you should be between 18 and 40 years old. You must have either a savings bank account or a post office savings account. Those who file income tax from 1 October 2022 cannot join the Atal Pension Yojana. According to the Finance Ministry, this change was made to ensure that the pension benefits reach mostly those who are financially weaker.
Installment Payment
In an APY account, you need to deposit money every month, every quarter or every 6 months on specific dates. The amount you contribute each year depends on three factors. Firstly, your age when you open the account and which pension slab you choose between ₹1000 and ₹5000. Additionally, the total contribution is determined by how many times you deposit money in a year.
Return of the scheme
In APY scheme, the money you contribute is invested, managed by fund managers like SBI Pension Fund, LIC Pension Fund and UTI Retirement Solution. Therefore, you may receive returns higher than the specified pension amount. However, if the returns are not sufficient to cover the agreed pension the government contributes to make up the difference and ensures you receive the specified pension amount.
This means that there is a guaranteed pension in this scheme and there is also an opportunity to earn additional returns.
Government Contribution to Eligible Subscribers
The government contributes to your retirement fund until the first five financial years. They provide 50% on the amount you contribute annually. However, the government’s contribution is capped at a maximum of ₹1000 even if your contribution exceeds this amount. To be eligible for the government contribution you must meet certain conditions. You should not be an income taxpayer and you should not be a beneficiary of other statutory social security schemes like EPF, Coal Mines Provident Fund or Assam Tea Plantation Provided Fund. Additionally, the individual must have a permanent retirement account number (PRAN) with the Pension Fund Regulatory and Development Authority (PFRDA) and all installments for the entire year should be paid.
How to apply for APY Account
You can open a savings account in any bank or post office. To do this you need to fill out the APY registration form and provide details like your mobile number and nominee information.
It’s not necessary to provide your Aadhar number during registration but you’ll have to do so later. Each subscriber can only open one APY account though every family member can open their own.
Instead of going to the bank, you can also open your APY account online using these methods.
Through Net Banking
You can start an Atal Pension Yojana (APY) account with the help of internet banking on your bank’s website or app. To do this, log in to your bank account, find the APY scheme, enter your personal details and nominee information. After that, choose the pension amount and approve auto-debit for installment payments.
eNPS – National Pension System – NSDL
You can register for the Atal Pension Yojana (APY) on eNPS National Pension System – NSDL website. After visiting the website, click on the Atal Pension Yojana section and then click on APY registration. Following this, you need to fill out a form providing details such as your income tax status and bank information. you’ll need to choose the contribution amount for which you’ll have three options.
Offline KYC
To complete the Aadhaar paperless offline KYC process, you need to provide the last six digits of your Aadhaar number and verify it with the OTP sent to your registered mobile number. Alternatively, you can generate this file on the UIDAI website.
For Aadhaar, input your Aadhaar number and verify it with the OTP received on your registered mobile number.
Virtual ID requires entering the 16-digit virtual identification number received from UIDAI and verifying it with an OTP. Then, choose your pension amount and contribution frequency, which you can change once a year. Provide nominee details as well. After that, sign in on the NSDL website for e-signing, and once the OTP is verified, your APY account will be opened.
Those ineligible for APY can consider other government schemes like PPF, NPS, and others for investment.
Penalty Charges to Atal Pension Yojana
To contribute to the Atal Pension Yojana, set up auto-debit with your bank. This is the sole method for contributions. Insufficient balance incurs penalties:
- Rs. 1 penalty for monthly contributions up to Rs. 100
- Rs. 2 penalty for contributions between Rs. 101 to 500
- Rs. 5 penalty for contributions between Rs. 501 to 1000
- Rs. 10 penalty for contributions over Rs. 1,001
What if you Fail to Contribute to APY?
If you fail to contribute regularly to the Atal Pension Yojana (APY) due to missed auto-debit instructions:
- Your APY account is frozen after 6 months of non-payment.
- The account is deactivated after 12 months of non-payment.
- Automatic closure of the APY account occurs after 24 months of non-payment.
- Bank can recover the due amount at any time until the last day of the month. Recovery can happen whenever there are funds in the APY-linked bank account during the month.
Tax Benefits for APY Subscribers?
Atal Pension Yojana (APY) is a government pension scheme that provides tax benefits to subscribers. Under Section 80C of the Income Tax Act, 1961, subscribers can avail tax exemption up to Rs. 1.5 lakh annually. Additionally, APY qualifies for an extra benefit of up to Rs. 50,000 per year under Section 80CCD (1) of the Income Tax Act, 1961. This additional benefit is similar to the one applicable to National Pension System contributions, and it’s separate from the Rs. 1.5 lakh exemption under Section 80C.
Payout to Nominees and Beneficiaries of APY
In case of the death of an Atal Pension Yojana (APY) subscriber, the nominee or beneficiary of the subscriber is entitled to receive a payout based on the chosen monthly pension amount.
| Monthly Pension Amount (in Rupees) | Return of Corpus to the Nominee of the Subscriber (in Rupees) |
|---|---|
1,000 | 170,000 |
2,000 | 340,000 |
3,000 | 510,000 |
4,000 | 680,000 |
5,000 | 850,000 |
Allocation of Funds in Atal Pension Yojana Investments
In the Atal Pension Yojana (APY), your money is invested across various assets to ensure stability and growth. Here’s a simplified breakdown of how your investment is allocated:
- Government Securities: Between 45% to 50%
- Debt Securities and Bank Term Deposits: Between 35% to 45%
- Equity and Related Instruments: Between 5% to 15%
- Asset Backed Securities, etc.: Maximum 5%
- Money Market Instruments: Maximum 5%
These allocations ensure a balanced investment strategy, aiming for a guaranteed pension while also offering potential returns above the guaranteed amount, which can benefit the subscriber or their nominees in case of unforeseen circumstances.
