Atal Pension Yojana (APY)

Atal Pension Yojana is a social security scheme for those persons who are working in the unorganized sector. Basically this scheme encourages individuals working as domestic help, drivers, farmers, small businessmen to join National Pension Scheme (NPS). This scheme was launched in the year 2015 with a motive to secure every citizen in their old age, and replaced the previously existing Swavalamban scheme. It is managed by the Pension Fund Regulatory and Development Authority (PFRDA) of India and every subscriber is provided Permanent Pension Account Numner (PRAN) by PFRDA. Pension amounts between Rs. 1000 to Rs. 5000 will be given under this scheme, according to the option that the subscriber chooses.

Eligibility:

Age: Anyone between the ages of 18 and 40 years is eligible for this scheme.

Bank account and documents: To avail this scheme, the customer must have a savings bank account and must be linked to Aadhaar under KYC (Know Your Customer) norms.

Duration: The subscriber must make contributions for minimum of 20 years to avail the pension after retirement. The maximum number of years to make contributions is 42 years.

Customers may apply for this scheme in any nationalised bank in India by filling up the prescribed form.

Benefits:

Monthly pension from the retirement age (60 years) is guaranteed. In case of death of the account holder under this scheme, the spouse is also eligible to receive pension.
The Pension Amounts offered are Rs. 1000, Rs 2000, Rs 3000, Rs. 4000 and Rs 5000 monthly payments from the retirement age (60 years), till the death of the subscriber.
The Government will also co-contribute 50% of the amount or Rs. 1000, whichever is lower, for certain subscribers who are not covered under any other statutory scheme and do not pay income tax.
In case of the death of the subscriber, the spouse may choose to receive the pension, or close the pension account and receive the entire amount collected, including the interest earned on it. In case of death of the spouse as well, the pension can be collected by a nominee (Any family member) that the subscriber chooses.
Auto debit feature is also available, wherein the monthly/quarterly/half-yearly payment will get automatically debited from the registered bank account. But the subscriber should ensure that minimum balance is maintained.

Tax Exemptions:

Subscribers of APY are eligible for tax exemption up to Rs. 50,000 under the section 80CCD of the IT Act, 1961. This tax exemption will be additional to Rs. 1,50,000 provided under 80C for payment against insurance premium, Employee Provident Fund, Public Provident fund etc.

Penalties for non-payment/delay:

Rs 1 on maximum Rs. 100 of monthly contributions
Rs 2 on amount of Rs. 101- 500 monthly contribution
Rs. 5 on amount of Rs. 501-1000 monthly contribution
Rs. 10 on amount of Rs. 1000 and more of monthly contribution

If the subscriber does not make his contribution for a continuous period of 6 months, the account will be frozen. In case the default period continues to 12 months, then the APY account will be deactivated and any accumulated balance along with interest will be returned to the subscriber.

Exit from the Scheme:

There is no option to exit the scheme before retirement age, unless there is some extraordinary circumstance-such as death of subscriber or terminal illness. In case of such an exit, only the accumulated amount from subscriber’s contribution and interest accrued on it will be returned. The government contribution and any interest earned on it will not be given.

Rates and Example

Suppose a person opens an APY account at the age of 40 years and chooses the Rs. 5000 monthly pension plan, then for a period of 20 years, he has to make a contribution of Rs. 1454 per month.

Alternatively, a person who is 20 years old opting for Rs. 3000 monthly pension plan will need to pay Rs. 150 per month for a period of 40 years.