In June 2015, Indian government with the administration of Pension Fund Regulatory and Development Authority (PFRDA) and National Pension System (NPS) launched “Atal Pension Yojana” to benefit the uncategorized individuals of the India Society. This pension scheme was introduced for those people from the weaker section of the society keeping in mind that it could benefit them during their old age.
But, this pension scheme is also beneficial for those individuals working in private sectors and those who are self-employed. It focuses on helping people from the weaker section to save some amount for their older age. The pension money people get will depend on their contribution made.
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 honorable Finance Minister Mr Arun Jaitley.
Atal Pension Yojana is a pension scheme mainly aimed at the unorganized sector such as maids, gardeners, delivery boys, etc. This scheme replaced the previous Swavalamban Yojana which wasn’t accepted well by the people.
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 an 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 be given the accumulated corpus.
However, if the contributor dies before completing 60 years of age, the spouse is also given an option to 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 (For eg: Employee’s provident fund), or should not be paying income taxes, in order to avail Government’s co-contribution.
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.
Follow these steps to avail the benefits of APY.
1. All nationalized banks provide the scheme. You can visit any of these banks to start your APY account.
2. Atal Pension Yojana forms are available online and at the bank. You can download the form from the official website.
3. The forms are available in English, Hindi, Bangla, Gujarati, Kannada, Marathi, Odia, Tamil, and Telugu.
4. Fill up the application form and submit it to your bank.
5. Provide a valid mobile number, if you haven’t already provided to the bank.
6. Submit a photocopy of your Aadhaar card.
You will be sent a confirmation message when the application is approved.
The monthly contribution depends upon the amount of pension you want to receive upon retirement and also the age at which you start contributing. The following table tells you how much you need to contribute per annum based on your age and pension plan.
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 closed 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.
Contributions made by an individual under the Atal Pension Yojana are eligible for the deductions under section 80CCD of the Income Tax Act, 1961. Maximum deduction allowed under section 80CCD (1) of the Income Tax Act, 1961 is 10% of gross total income subject to maximum deduction of Rs. 1,50,000 p.a. as specified under section 80CCE of the Income Tax Act. An additional contribution of Rs. 50,000 p.a. is eligible for an additional deduction of Rs. 50,000 p.a. under section 80CCD(1B) of the Income Tax Act, 1961.
These deductions are subject to the fulfillment of the conditions mentioned in the Income Tax Act, 1961. Tax laws are subject to amendments from time to time. This is not a legal advice or tax advice and users are further advised to consult their tax advisors before making any decision or taking any action.
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