Atal Pension Yojana – APY Scheme Eligibility & Benefits

With the successful implementation of Pradhan Mantri Jan Dhan Yojana and embracing a huge population to avail the banking benefits with opening a zero balance account with the continuation of Jan Dhan Yojana, a National Pension Scheme (NPS) which is known as Atal Pension Yojana (“APY”) was affected and passed in the Union Budget of 2015-16 by our honourable Finance Minister Mr. Arun Jaitley.
 

What is Atal Pension Yojana?

The government has launched the Atal Pension Yojana (APY), a pension scheme mainly aimed to create social security for all Indians. It is especially for the poor, the underprivileged, and the unorganised sector, such as maids, delivery boys, gardeners, etc. The APY scheme replaced the previous Swavalamban Yojana, which was not much accepted.
 

The goal of the scheme is to ensure that no Indian citizen has to worry about any illness, accidents or diseases in old age, giving a sense of security. Private sector employees or employees working with such an organization that does not provide them pension benefit can also apply for the scheme.

There is an option of getting a fixed pension of Rs 1000, Rs 2000, Rs 3000, Rs 4000, or Rs 5000 on attaining the age of 60. The pension will be determined based on the individual’s age and the contribution amount. The contributor’s spouse can claim the pension upon the contributor’s death, and upon the death of both the contributor and his/her spouse, the nominee will receive the accumulated corpus. However, if the contributor dies before completing 60 years of age, the spouse can either exit the scheme and claim the corpus or continue the scheme for the balance period.

As per the investment pattern laid down by the government of India, the collected amount under the scheme is to be managed by the Pension Funds Regulatory Authority of India (“PFRDA”).

The Government would also make a co-contribution of 50% of the total contribution, or Rs. 1000 per annum, whichever is lower, to all eligible subscribers who had joined between June 2015 and December 2015 for a period of 5 years, i.e., for financial years 2015-16 to 2019-20. The subscribers should not be part of any other statutory social security schemes (E.g., Employee’s provident fund) or should not be paying income taxes to avail of the Government’s co-contribution.

Eligibility for Atal Pension Yojana?

To avail benefits from the Atal Pension Yojana, you must fulfil the below requirements: 

1. Must be a citizen of India.
2. Must be between the age of 18-40
3. Should make contributions for a minimum of 20 years.
4. Must have a bank account linked with your Aadhar
5. Must have a valid mobile number

Those who are availing benefits of Swavalamban Yojana will be automatically migrated to Atal Pension Yojana.

How to Apply for Atal Pension Yojana?

There are two modes to apply for Atal Pension Yojana:- Online and Offline.

Online Mode:-

• One can also open an APY account online using one's Net banking facility.
• The applicant can log into his/her Internet banking account and search for APY on the dashboard.
• When you register for the scheme online using net banking, you can choose the auto-debit facility. This will deduct your contributions automatically until you reach the age of 60 from the date of enrollment. It is important to ensure that your account maintains a satisfactory monthly balance to cover the scheme payments.
• Only a few banks offer this online facility. You need to check with your respective banks if they provide this facility via net banking.

Offline Mode:-

• To obtain the 'Atal Pension Yojana form', kindly visit the bank or post office where your savings account is Maintained.
• It is important to duly fill in all the required fields of the form and submit it to the bank or post office. For identification purposes,  enclose a photocopy of your Aadhaar card along with the form.
• The form contains a section for acknowledgement that does not require your input. After the bank has processed your registration application, they will fill out the acknowledgement receipt and provide it to you.
• Once your application is approved, you will receive a confirmation message on your registered mobile number. Therefore, providing the correct mobile number while filing the form is imperative.

Monthly Contributions

The monthly contribution depends upon the pension amount you want to receive upon retirement and also the age at which you start contributing.

The following table mentions how much you need to contribute per annum based on your age and pension plan.

APY - Monthly contribution

How to Withdraw from APY?

Withdrawal from the APY scheme is not permitted before 60 years of age, but exit may be allowed in exceptional circumstances like the death of beneficiary or terminal disease. So the actual exit scenarios are: 

• Attaining 60 years of age: 100% annuitisation 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

Penalty on Defaults

If you default on your payments, your bank will collect some additional amounts as follows:

• Re. 1 per month for contribution upto Rs. 100 per month. 

• Re. 2 per month for contribution upto Rs. 101 to 500/- per month. 

• Re 5 per month for contribution between Rs 501/- to 1000/- per month. 

• Rs 10 per month for contribution beyond Rs 1001/- per month.

Tax exemptions

Tax exemption is available on contributions made by individuals towards the Atal Pension Yojana under Section 80CCD of the Income Tax Act, 1961. Under Section 80CCD (1), the maximum exemption allowed is 10% of the concerned individual’s gross total income up to a limit of Rs. 1,50,000. An additional exemption of Rs. 50,000 for contributions to the Atal Pension Yojana Scheme is allowed under Section 80CCD(1B).

Important Facts to know about APY

1. Since you will be making periodic contributions, the amounts will be debited automatically from your account. You need to make sure that you have sufficient balance in your account before each debit.
2. You can increase your premium at your will. You just have to visit your bank and talk to your manager and make the necessary changes.
3. In case you default on your payments, a penalty will be levied. A penalty of Rs. 1 per month for a contribution of every Rs. 100 or part thereof.
4. In case you default on your payments for 6 months, your account will be frozen and if the default continues for 12 months, the account will be deactivated and your account will be closed if you fail to make payments for 24 months and the remaining amount will be paid to the subscriber.
5. Early withdrawal is not entertained. Only in cases like death or terminal illness, the subscriber, or his/her nominee will receive the entire amount back.
6. In the event that you close the scheme before the age of 60 for any other reason, only your contribution plus interest earned will be returned. You will not be eligible to receive the government’s co-contribution or the interest earned on that amount.

Conclusion

The Atal Pension Yojana (APY) is very beneficial for people working in the private sector or organizations that do not provide retirement benefits like pensions. 

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