What is PM Atal Pension Yojana (APY): Age limit, details and Tax Benefits

Retirement in India is a tough call, especially for those working under the informal sector working conditions. In the year 2015, the Indian government launched APY to help make retirement a bit easier. It is basically a fixed monthly pension offered to people after they attain the age of 60, giving them some money later in life.

In this blog, we are going to elucidate the Atal Pension Yojana: Who can avail of it, the age limit, tax clause, and how to apply.

What is the Atal Pension Yojana(APY) Scheme?

The Atal Pension Yojana is a government scheme that was initiated to provide pensions to persons engaged in the unorganised sectors of the Indian economy. Anyone who is a citizen of India and fulfills the eligibility criteria is free to join this scheme. Under the scheme, persons have to contribute fixed amounts every month or quarterly or biannually. They get a pension to the amount of ₹1,000, ₹2,000, ₹3,000, ₹4,000 or ₹5,000 after attaining the age of 60. The scheme seeks to build some financial muscle behind those in the lower income groups so they are not entirely at the mercy of others in old age. APY is part of the NPS and is managed by the Pension Fund Regulatory and Development Authority.

The following are the parameters that need to be satisfied for Atal Pension Yojana:

Atal Pension Yojana Details

Here's the basic snapshot of the Atal Pension Yojana: Guaranteed pension:

1. Pension Offered : ₹1,000, ₹2,000, ₹3,000, ₹4,000, or ₹5,000 monthly – after 60 years of age depending on the contributions made by the subscribers.

2. Backing of the Government : Guaranteed payments of pension by the Indian government make it a safe and secure scheme.

3. Auto Debit : Contribution amounts will be auto-debited from your bank account, ensuring no missed payments.

4. Flexible Contributions : You can choose the contribution amount based on the pension amount you want after 60 years.

5. Benefits to Spouse : In the event of death, your spouse continues to receive the pension. If both die, the nominee will receive the accumulated corpus.

6. Early Exit : Withdrawal is allowed only under rare circumstances like death or terminal illness. For any other reason, only your contributions will be refunded, excluding the government’s share.

Atal Pension Yojana: Tax Benefits

One cool thing about the Atal Pension Yojana is the tax savings - contributions made toward the APY can claim deductions under the Income Tax Act of 1961.

1. Deductions would be claimed under Section 80CCD (1) (similar to NPS).

2. For a maximum of ₹1.5 lakhs under Section 80C of the Income Tax of 1961 per financial year.

3. You might be eligible for an additional deduction of ₹50,000 under Section 80CCD (1B).

Step-by-step Application Process

Online

Process 1:

• An APY account can be opened online through Net banking facility. Applicant can log in to their internet banking account and locate APY in the dashboard.

• Fill in basic and nominee details.

• Provide consent for auto debit of premium from account and submit the form.

Process 2:

• Go to the official website and select "Atal Pension Yojana".

• Click on "APY Registration" and complete the basic details.

• KYC can be done via one of the following methods:

• Offline KYC – Upload Aadhaar XML file.

• Aadhaar – OTP verification on mobile number linked to Aadhaar.

• Virtual ID – Use Aadhaar virtual ID for KYC.

• Once basic details are filled, an acknowledgement number is generated.

• Fill in personal details and select the desired pension amount.

• Select the frequency of contribution.

• Fill nominee details and submit.

• Redirected to NSDL website for eSigning via Aadhaar OTP.

• On successful verification, the citizen is registered.

• Alternatively, registration can be done via the e-APY portal or any bank web portal providing this feature.

Offline

1. Choose a Bank or Post Office : Visit any APY-enabled bank or post office.

2. Fill Out the Form : Get or download the APY form and fill in your details.

3. Select Your Contribution Amount : Choose your desired pension amount (₹1,000 to ₹5,000). Monthly contribution varies by age.

4. Submit the Form and Set Up Automatic Payments : Link your savings account and ensure sufficient balance for deductions.

Helpline Number: Toll-Free Helpline for APY Scheme – 1800-110-069

Monthly Contribution Amount for Atal Pension Yojana

How to Withdraw from APY?

• Withdrawal is not permitted before the age of 60, except in case of death or terminal illness.

• Upon attaining 60 years, 100% of the pension wealth is annuitized to the subscriber.

• In case of death, the pension is paid to the spouse, and the corpus is given to the nominee after the spouse’s death.

Penalty on Defaults

• ₹1/month for contributions up to ₹100.

• ₹2/month for ₹101–₹500.

• ₹5/month for ₹501–₹1000.

• ₹10/month for contributions above ₹1000.

Benefits of Atal Pension Yojana

• Pension Plan : Ensures fixed monthly income after retirement.

• Government Backing : Provides security and reliability.

• Very Low Contribution Rate : Affordable for low-income individuals.

• Security for the Husband/Wife : Spouse continues to benefit post-death.

• Promotes Savings : Encourages long-term financial planning.

Drawbacks of Atal Pension Yojana

While APY has its advantages, consider these points:

• Withdrawals are restricted before age 60 (except in cases of death or terminal illness).

• Pension amounts are fixed (capped at ₹5,000 per month).

• Pension income is taxable after retirement.

Conclusion

The Atal Pension Yojana is one of the best options to prepare for retirement with the ability to pay reasonable contributions, government guarantee, and tax benefits. It is a good option, basically meant for people in the unorganized sector.

If eligible, and you wish to have a secure government-sponsored retirement savings scheme, do sign up for the Atal Pension Yojana today. It is easy, efficient, and reassures you that you can expect some income in your later years along with tax benefits.