Atal Pension Yojana: Securing Your Retirement

Atal Pension Yojana: Securing Your Retirement

The Atal Pension Yojana (APY) is a government-backed pension scheme launched in India in 2015. It aims to provide a regular income source for Indian citizens after they reach retirement age. This scheme is particularly beneficial for individuals working in the unorganized sector, who often lack access to formal pension plans.

APY Key Features

• Guaranteed Pension: Subscribers can choose a fixed monthly pension amount of Rs. 1,000, Rs. 2,000, Rs. 3,000, Rs. 4,000, or Rs. 5,000 upon reaching 60 years of age. The chosen pension amount determines the monthly contributions required.
• Flexible Contributions: Individuals can start investing in APY as early as 18 years old and up to 40 years old. They can contribute a fixed monthly amount throughout the scheme tenure, which can be 20, 30, or 42 years depending on the entry age.
• Government Co-contribution (Benefit Discontinued): Initially, the government offered a co-contribution scheme for APY accounts opened between 2015-16. This benefit is no longer available for new subscribers.
• Automatic Debit: For convenience, contributions can be set up for automatic debit from the subscriber's bank account. This ensures timely payments and avoids missing contributions.
• Increasing Contributions: Subscribers can increase their monthly contributions once a year to build a larger pension corpus.
• Spousal Benefit: In the unfortunate event of the subscriber's death before reaching 60 years, the spouse becomes eligible to receive the pension. The spouse can choose to continue receiving the pension or withdraw the accumulated corpus.
• Nominee Benefit: If both the subscriber and spouse pass away before 60 years, the nominee will receive the accumulated corpus amount.
• Tax Benefits: Contributions made towards APY are eligible for tax deductions under Section 80CCD of the Income Tax Act, 1961. However, it's advisable to consult a tax professional for details on eligibility and claiming tax benefits.

APY Eligibility

• The scheme is open to all the citizens of India.
• The Applicants’ age must be between 18 and 40 years old.
• A linked savings bank account with an active mobile number is mandatorily required.
• An Aadhaar card number is required for one to enrol.

Recent Update: Income Tax Payers

As of October 1, 2022, individuals who are or have been income taxpayers are no longer eligible to join APY. This change aims to ensure that the scheme's benefits reach the intended beneficiaries – those working in the unorganized sector who may not have access to other retirement plans.

Withdrawal Rules

While APY is designed to provide income after retirement, there are limited withdrawal options before reaching 60 years of age. Subscribers can only exit the scheme prematurely in exceptional circumstances like terminal illness. In such cases, the spouse can choose to continue receiving the pension or withdraw the accumulated corpus. However, if both the subscriber and spouse pass away before 60 years, the nominee will receive only the accumulated contributions and interest earned, not the guaranteed pension benefits.

APY vs. Other Pension Schemes

Here's a brief comparison of APY with other pension schemes in India:

• National Pension System (NPS): While NPS is also a government-backed pension scheme, it offers more investment options and flexibility in exit options. However, NPS contributions do not qualify for tax deductions under Section 80CCD.
• Employee Provident Fund (EPF): This scheme is primarily for salaried employees and offers a lump sum payout at retirement along with a monthly pension.

Conclusion

The Atal Pension Yojana provides a valuable option for individuals working in the unorganized sector to secure their financial independence in retirement. With its guaranteed pension amounts, flexible contributions, and tax benefits, individuals can ensure a steady income stream after they stop working.