Atal Pension Yojana - Atal Pension Scheme : Tax Exemptions, Eligibility, And Contribution

Senior citizens require some sort of support from the government to spend their old age comfortably. While the government has started many pension schemes and saving schemes, Atal Pension Yojana (APY) is a leading saving scheme that helps the elderly get a fixed pension amount after the age of 60. Let us learn more details about this pension scheme of the government.

Objectives Of The Atal Pension Yojana

Some of the key objectives of APY are:

• Financial security in old age: APY offers financial security to individuals after retirement. By contributing regularly to the scheme, beneficiaries are guaranteed a fixed monthly pension between ₹1,000 to ₹5,000 after the age of 60. This provides a steady income, ensuring financial independence in old age.

• Aid to the unorganised sector: The scheme specifically focuses on workers in the unorganized sector, who don’t have access to formal pension schemes. These workers do not get to enjoy retirement benefits or savings plans. The APY bridges this gap, encouraging them to save systematically for retirement.

• Saving habit: A key objective of the APY is to promote long-term saving habits among citizens. By making small, regular contributions from an early age, individuals can save enough to secure their retirement.

• Contribution by the government: Initially, the Indian government provided co-contributions to encourage participation in the scheme. For eligible individuals, the government used to give 50% of the total contribution or ₹1,000 per annum, whichever was lower, for a period of five years (2015-2020).

• Flexibility: APY offers flexibility in the choice of pension amount (ranging from ₹1,000 to ₹5,000), depending on the applicant’s contribution. This objective allows people from different income groups to select a pension amount based on their financial capacity, ensuring inclusivity.

• Straightforward process: The government aimed to make the APY easily accessible by linking it to bank accounts through the auto-debit facility which ensures that money is deposited regularly. This simplicity encourages higher enrollment and reduces administrative burdens.

How To Calculate The Atal Pension Yojana?

To calculate the potential benefits of APY, one can use an APY Calculator:

1. Please visit the official financial websites of any major banks like SBI, HDFC, ICICI, and others that offer APY.

2. Navigate to the Atal Pension Yojana Calculator, usually under the pension-related schemes.

3. Fill in the required details like your age and desired monthly pension.

4. Click on calculate which will then show you the expected monthly contribution to be made, the period of the contribution, and the expected pension.

What Are The Benefits Of Atal Pension Yojana?

The Atal Pension Yojana (APY) offers several important benefits that make it an attractive option for those seeking financial security in their retirement years. By offering guaranteed pensions and government contributions, this scheme provides stability and peace of mind to individuals, particularly those in the unorganised sector. Below are some of the key benefits of the APY:

• Guaranteed Pension: APY provides a fixed monthly pension ranging from ₹1,000 to ₹5,000, depending on the contribution and age at which you start the scheme.

• Government Contribution: For eligible subscribers, the government contributes 50% of the total contribution or ₹1,000 per annum, whichever is lower, for the first five years.

• Spousal Pension: In the event of the subscriber’s death, the spouse is entitled to receive the same pension amount. If both the subscriber and spouse pass away, the nominee will receive the accumulated corpus.

• Tax Benefits: Contributions to APY are eligible for tax benefits under Section 80CCD of the Income Tax Act.

• Low-Risk Investment: Since the Government of India backs the scheme, it is considered a low-risk investment.

• Financial Security: APY ensures financial independence and security in old age, reducing the worry about illnesses, accidents, or diseases

Exclusions Under The Atal Pension Yojana

People who are already covered under other social security government schemes aren’t eligible for the APY scheme. The list of the social security government schemes are:

• Employees’ Provident Fund and Miscellaneous Provision Act, 1952.

• The Coal Mines Provident Fund and Miscellaneous Provision Act, 1948.

• Assam Tea Plantation Provident Fund and Miscellaneous Provision, 1955.

• Seamens’ Provident Fund Act, 1966.

• Jammu Kashmir Employees’ Provident Fund and Miscellaneous Provision Act, 1961.

• Any other statutory social security scheme.

Fees And Charges Of The Atal Pension Yojana

How To Add Nominee Details To APY Account?

To add nominee details to one’s APY account, please follow the following steps:

1. Log in to the Internet banking portal of your bank.

2. Navigate to the government scheme sections and find APY.

3. Select your APY account.

4. Go to the ‘add nominee’ option.

5. Enter the details of the nominee like their name, age, date of birth, etc.

6. Confirm and submit the details.

Eligibility For Withdrawal from APY

You can not withdraw from the APY scheme till you turn 60 years of age. However in exceptional circumstances such as death of a beneficiary or a terminal disease, withdrawal can be made. Following are the conditions:

• Attaining 60 years of age: 100% transfer of pension wealth to subscriber

• Death of subscriber: Pension will be available to spouse and on death of spouse, pension corpus will be returned to the nominee. In case of death of the subscriber before 60 years, option will be available to the spouse of the subscriber to continue contribution in the APY account of the subscriber, which can be maintained in the spouse’s name, for the remaining vesting period, till the original subscriber would have attained the age of 60 years.

• Partial or Complete withdrawal in case the beneficiary suffers from a terminal disease.

Also Read: EPS Withdrawal Rules 2024: Key Changes and How They Benefit You

Penalty on Defaults Of Contributing For Atal Pension Yojana

If you default on your payments, your bank will collect some additional amounts for the APY scheme:

Conclusion

The Atal Pension Yojana (APY) serves as a vital initiative that provides much-needed financial security for workers in India’s unorganised sector. By offering guaranteed pension benefits, government contributions, and tax incentives, APY promotes a culture of savings and ensures a steady source of income during retirement. It not only safeguards the future of individuals but also strengthens the nation’s social security system, making it an essential step toward financial inclusion and long-term stability for millions.

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