Atal Pension Yojana | Review, details, contributions, guide

Here is a detailed guide to Atal Pension Yojana, how to subscribe, eligibility to APY, tax benefits, contribution plans and more
Atal Pension Yojana (APY) scheme review

Great pension plans that offer a good source of income when you retire are very rare. Most require you to put in a lot of money to get a guaranteed minimum monthly pension. Not, Atal Pension Yojana. APY (earlier known as Swavalamban Yojana) is a brilliant scheme by the Indian Government that allows you to save a very small amount on a monthly basis and reap as much as Rs.60,000 per year as tax free pension.

What is Atal Pension Yojana?

The Atal Pension Yojana (APY) is a pension scheme started by the government of India that promises fixed monthly pensions ranging from Rs.1000-Rs.5000. It is based on monthly contributions by the subscriber, that ends at the pension age of 60, and is backed by the government.

Under this scheme, the subscriber will need to pay a monthly or quarterly payment into the scheme. The amount to be paid depends upon two factors:

  1. Age of the subscriber
  2. How much monthly pension the subscriber wants to receive. There are 5 options, Rs.1000, Rs.2000, Rs.3000, Rs.4000, Rs.5000

Atal Pension Yojana and Swavalamban Yojana

The APY scheme first came into existence in the budget year 2010-2011 as Swavalamban Yojana, and was relaunched as APY during the 2015-16 Union Budget. Both the Atal Pension Scheme and Swavalamban scheme are primarily targeted at the unorganized sector workers and is under the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013.

APY provides the eligible subscriber with guaranteed pension ranging from Rs.1000 to Rs.5000 per month. The Government of India stated that it would also co-contribute half of the subscriber’s contribution, or Rs. 1000 (whichever is lower), for a period of 5 years, to those who subscribed between June 2015 to 15th March,2016. This co-contribution would only be available to those who are not covered by any other social security scheme or are not an income tax payer.

Subscribing to APY

Age limits

Primary requirement is that the subscriber is a Citizen of India. The minimum age requirement is 18 years old and the maximum age limit to be eligible to subscribe is 40 years.

Valid Bank Account

The subscriber should have a functioning savings account that is in their name. This bank account will be linked to their Atal Pension Yojana Account and contributions will be auto-debited from this savings account. Later, on maturity, the monthly fixed pension will be credited into this savings account.

National Pension Scheme Subscribers

Furthermore, existing National Pension Scheme subscribers can also subscribe, i.e., if they meet the basic eligibility criteria. In an updated FAQs list in the APY website, it states that NRIs in the age group of 18-40 are also eligible to apply if they have a bank account with APY POP.

APY Registration Process

The registration procedure to the APY scheme is very simple. All one requires is a savings bank account or post office savings bank account, Aadhar number as ID Proof and mobile number. One may also need to provide Aadhar ID details of their spouse and/or nominee. It is compulsory to nominate a nominee while opening an APY account.

There are two ways to subscribe to APY. One option is to complete the APY application in the bank branch where your savings bank account is. Some banks automatically retrieve your KYC details from the bank account.

The other option is applying online through one’s bank’s net banking facility. Only some banks such State Bank of India, HDFC Bank and ICICI bank allow customers to open the APY account via internet banking.

APY Pension Plans and Contribution Limits

At the time of enrolment, the subscriber can choose his/her monthly pension plan- 1000/2000/3000/4000/5000 per month. Depending on the plan and contribution level, the money will be deducted from his/her bank account and added into their APY account resulting in accumulated pension wealth.

The subscriber will start to receive the minimum pension from the Financial Year following them reaching the age of 60. The earlier you register, the lesser amount you contribute each month and more time you have to build up your APY corpus. The indicative monthly contribution depending on your plan and the age at which you enroll can be found below.

Atal Pension Yojana Age wise monthly Contribution table

Age of SubscriberTotal Years of PaymentRs 1000 pension/monthRs 2000 pension/monthRs 3000 pension/monthRs 4000 pension/monthRs 5000 pension/month
18424284126168210
19414692138183228
204050100150198248
213954108162215269
223859117177234292
233764127192254318
243670139208277346
253576151226301376
263482164246327409
273390178268356446
283297194292388485
2931106212318423529
3030116231347462577
3129126252379504630
3228138276414551689
3327151302453602752
3426165330495659824
3525181362543722902
3624198396594792990
37232184366548701,087
38222404807209571,196
39212645287921,0541,318
40202915828731,1641,454

How is APY contribution collected

The contribution amount is collected through auto debit facility from savings bank account/ post office savings bank account of the subscriber. The subscriber can choose the intervals they prefer. Available payment intervals are:

  • Monthly
  • Quarterly
  • Half-yearly intervals

Due Date for APY payment

There is no particular due date for the auto retrieval of the contribution amount. APY contributions will be collected through auto-debit of their savings bank account/ post office savings bank account on any date of the particular month it is due in.

In case of monthly contributions or any day of the first month of the quarter, in case of quarterly contributions or any day of the first month of the half year, in case of half-yearly contributions.

According to a recent update on the APY website on 1st July, subscribers can change their pension plan, i.e., upgrade or downgrade it. But it can be done only once a year.

Penalty for non payment of APY scheme

In case of delays in payment due to lack of sufficient balance, there are charges for default. These charges vary from a minimum of Re.1 to a maximum of Rs.10.  The charges for default are as follows:

  • Re. 1 per month for contribution up to Rs. 100 per month
  • Rs. 2 per month for contribution up to Rs. 101 to 500/- per month
  • Rs. 5 per month for contribution between Rs 501/- to 1000/- per month
  • Rs. 10 per month for contribution beyond Rs 1001/- per month

The default charges amount collected will remain as part of the pension APY corpus of the subscriber. In case of inadequate balance in the saving account of the subscriber till the last date of the month / last date of the first month in a quarter / last day of the first month in a half year, as the case may be, it will be treated as a default. The contribution will have to be paid in the subsequent month along with default charges for delayed contributions.

Frozen and termination of APY Account

If one discontinues paying the contribution for 6 months, the account will be frozen; after 12 months, it will be deactivated; and after 24 months, the account will be closed. It is best if the subscriber ensures enough funds in their account for auto debit of the contribution amount.

Maturity Benefits

Once the eligible subscriber reaches the age of 60, he or she will start getting the monthly pension to their registered bank account. There are a couple of major benefits of the Atal Pension Yojana.

  1. Guaranteed Pension Income till you pass away
  2. Tax Benefits
    1. Tax benefits on Contribution
    2. Tax benefits on pension received
  3. Pension to Spouse post expiry of subscriber

Guaranteed Pension

The APY scheme gives you a fixed pension after you turn 60. This is the biggest advantage. As you will see the from APY scheme calculator below, the money you save towards this scheme can be earned back in 3.5 years. Post that all money you receive is pure profitable passive income.

Tax Benefits

APY scheme, gives you double tax benefits. All APY subscribers are exempt from taxes on contributions and pension they receive.

Tax on APY Contribution

Money you pay towards the Atal Pension subscription is exempt from tax up to a limit of Rs.1,50,000 under Section 80CCD of Indian Income Tax Act. Along with this, you also get an additional limit of Rs.50,000 under section 80 CCD(1B). This is along with your contributions to National Pension Scheme, PF etc.

Tax on APY monthly Pension received

In addition to the tax exemption on the monthly contribution, the monthly pension you receive too is tax free. Eg. If you receive Rs.5000 per month after turning 60, that is about Rs.60,000 per year. This income is purely tax free.

Pension to Spouse

On expiry of the subscriber, their spouse will be eligible to continue getting the pension till they expire. This gives additional financial security to the spouse.

Atal Pension Yojana Calculator

Here is an example calculation of how much you will pay and how much you will get back as pension. Let us say, you are 30 years old. If you choose to receive Rs.5000 pension per month after you turn 60, then:

  • Monthly Contribution is: Rs.577
  • Total Contribution Years is: 30 years
  • Total Contribution Amount is: Rs.2,07,720 (577x12monthsx30years)
  • Annual Pension post 60 is: Rs.60,000
  • Number of years to get back money contributed: 3.46 years

As you can see, for patiently contributing to the APY scheme for 30 years, you will earn back the money you contributed in 3.5 years. Post that you will continue getting tax free income till you pass away. And even better, your spouse will be getting this income till he/she passes away.

How to Exit/End the APY Scheme

There are a few ways one can exit from the APY scheme.

Withdraw Corpus

Once the subscriber turns 60, they can opt to exit the APY scheme with 100% pension corpus wealth. Voluntary withdrawal before the age of 60 is permitted. However, the subscriber shall only be refunded the contributions made by them with the net actual accumulated income earned on their contributions (after deducting account maintenance charges).

Subscribers who enrolled before March 16th 2016, will not receive the government co-contribution and the accrued income earned on the same, if they voluntarily withdraw before the age of 60.

On death of Subscriber

In case of death of the subscriber before the age of 60, there are two options. In one option, the spouse of the subscriber can continue contribution to the APY account until the original subscriber would have turned 60. The spouse shall then be entitled to receive the same pension amount as the original subscriber, until death of the spouse. This is applicable even if the spouse of the subscriber has his/her own APY account and pension amount. The other option is the entire accumulated corpus till date under APY will be returned to the spouse/ nominee.

The subscriber’s spouse is considered as the default nominee. If the subscriber is unmarried at the time of enrolment, they can nominate any other person as nominee and update spouse details after they are married. On account of death of both the subscriber and spouse, the pension wealth accumulated till age 60 years of the subscriber would go to the subscriber’s nominee. Aadhar details of the spouse and nominee must be provided at the time of enrolment.

Some frequently asked questions on Atal Pension Yojna

Can NPS subscribers subscribe to Atal Pension Yojna?

Yes, there is no restriction. All National Pension Scheme subscribers are allowed to subscriber to APY too.

Is Atal Pension Yojana a Guaranteed Pension Scheme

Yes, it is a Guaranteed Pension Scheme backed by the government of India

How many APY accounts can I have?

Each Indian Citizen is eligible for One APY account only

Who is eligible for Atal Pension Yojana Scheme?

Any citizen of India, who is older than 18 years and younger than 40 years and has a valid bank account in their name, an Aadhar card and a mobile number is eligible to subscribe to APY.

How is money in Atal Pension Yojana invested?

The money is invested in low risk bonds, securities etc. It is overseen by the Finance Ministry and PFRDA.

Can an APY Account be opened without Bank Account?

No to open and APY account it is mandatory to have a bank savings account. This account will be used to contribute to APY scheme and also receive the pension later on.

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Abhi

Abhi is a 29 yr old Indian, on FIRE to retire by 40. He has been investing and learning Finance for the past 12 years. After completing Mechanical engineering, he started working in a multi-national Bank and grew to become an AVP. Currently with an IT MNC as a VP. He lives in Bangalore with his wife and their 1 year old daughter. In his free time, Abhi loves to game on the Xbox, watch movies, read and blog.

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