Thursday 8 February 2018

Atal Pension Yojana - APY

Atal Pension Yojana (APY) is a pension scheme open to all citizens of India with main focus on unorganized sector workers. Since unorganized sector workers are not covered under any social security scheme, APY scheme is started to help them to save money for the old age.

The biggest draw of Atal Pension Yojana is the guaranteed minimum pension at the age of 60 years based on the opted amount and the contribution by the subscriber. APY is administered by the Pension Fund Regulatory and Development Authority (PFRDA).

Eligibility for APY

Any citizen of India can subscribe to APY scheme. The eligibility criteria that you must fulfill is as follows-

  • You should be between 18 and 40 years of age.
  • You should have a saving bank account. If you don’t have a bank account then you need to open one.
  • You should have a mobile phone and the number of your mobile should be registered with your bank account.

Pension amount received under APY

One of the biggest advantage of APY is the guaranteed minimum pension. Based on your contribution you will get a guaranteed minimum pension of Rs 1,000/-, 2,000/-, 3,000/-, 4,000 and 5,000/- per month after the age of 60 years.

Here note that the minimum pension is guaranteed by the government so the amount you opted for will definitely be given to you as pension. However, if higher investment returns are received on the contributions of subscribers of APY, higher pension would be paid to the subscribers.

Monthly contribution in APY

As already stated minimum age to subscribe to APY is 18 and maximum is 40 years. You need to contribute till the age of 60. So sooner you start less you need to pay as premium.

You premium also depends upon the pension amount you opt for out of Rs. 1000, 2000, 3000, 4000 or 5000 per month.

Here is a table courtesy PFRDA - http://pfrda.org.in//MyAuth/Admin/showimg.cshtml?ID=760 which shows the monthly, quarterly or half yearly contribution based on age.

Minimum Guaranteed Pension of Rs. 1000/month Minimum Guaranteed Pension of Rs. 2000/month Minimum Guaranteed Pension of Rs. 3000/month Minimum Guaranteed Pension of Rs. 4000/month Minimum Guaranteed Pension of Rs. 5000/month
Return of corpus amount to the nominee Rs. 1.70 Lakh Rs. 3.40 Lakh Rs. 5.10 Lakh Rs. 6.80 Lakh Rs. 8.50 Lakh
Age at entry Vesting period Monthly instalment Qaurterly instalment Half yearly instalment Monthly instalment Qaurterly instalment Half yearly instalment Monthly instalment Qaurterly instalment Half yearly instalment Monthly instalment Qaurterly instalment Half yearly instalment Monthly instalment Qaurterly instalment Half yearly instalment
18424212524884250496126376744 1685019912106261239
19414613727192274543138411814 18354510802286791346
204050149295100298590150447885 19859011692487391464
213954161319108322637162483956 21564112692698011588
2238591763481173496901775271045 23469713812928701723
2337641913781273787491925721133 25475714993189481877
2436702094131394148202086201228 277826163534610312042
2535762264491514508912266741334 301897177634611212219
2634822444841644899682467331452 327975193040912192414
27339026853117853010502687991582 3561061210144613292632
28329728957219457811452928701723 3881156229048514452862
293110631662621263212513189481877 4231261249652915773122
3030116346685231688136334710342048 4621377272757717203405
3129126376744252751148737911292237 5041502297463018783718
3228138411814276823162941412342443 5511642325268920534066
3327151450891302900178245313502673 6021794355375222414438
3426165492974330983194849514752921 6591964388982424564863
352518153910683621079213654316183205 7222152426190226885323
362419859011693961180233759417703506 7922360467499029505843
372321865012874361299257365419493860 87025935134108732396415
382224071514164801430283372021464249 95728525648119635647058
392126478715585281574311679223604674 105431416220131839287778
402029186717175281734343587326025152 116434696869145443338581

Procedure for opening APY account

Since it is required to have a bank saving account for opening APY account so you need to approach the bank branch where you have an account or you can open a bank account.

Then fill up the APY registration form. Also register your mobile number/Aadhaar.

Each subscriber will be provided with an acknowledgement slip after joining APY which would invariably record the guaranteed pension amount, due date of contribution payment, PRAN etc.

A subscriber can open only a single APY account.

Co-contribution by the government

As an incentive to increase participation to APY government decided to co-contribute 50% of the total contribution or Rs. 1,000/- per annum, whichever is lower, to the eligible APY account holders who join the scheme during the period 1st June, 2015 to 31st December, 2015.The Government co-contribution will be given for 5 years from FY 2015-16 to 2019-20.

Eligibility for co-contribution by the government

In case you are wondering why you didn't get any co-contribution from the govt. they you must know that only those individuals are eligibe for co-contribution by the givt. who are not covered by any Statutory Social Security Schemes and are not income tax payers.

For example, members of the Social Security Schemes under the following enactments would not be eligible to receive Government co-contribution:

  1. Employees’ Provident Fund & Miscellaneous Provision Act, 1952.
  2. The Coal Mines Provident Fund and Miscellaneous Provision Act, 1948.
  3. Assam Tea Plantation Provident Fund and Miscellaneous Provision, 1955.
  4. Seamens’ Provident Fund Act, 1966.
  5. Jammu Kashmir Employees’ Provident Fund & Miscellaneous Provision Act, 1961.
  6. Any other statutory social security scheme.

Nomination facility in APY

It is mandatory to provide nominee details in APY account.

Subscriber needs to provide the spouse details too wherever applicable. This will help spouse to maintain the APY account or keep getting pension in case of subscriber's death.

Their aadhaar details are also to be provided.

Withdrawal procedure from APY

Here are the APY withdrawal scenarios-

  1. Completing the age of 60 years – You need to pay premium till the age of 60 years. Once you reach the age of 60 you can submit the request for drawing pension. The whole accumulated corpus is converted to annuity and subscriber starts getting monthly pension.
  2. In case of subscriber's death after 60 years – In case of death of subscriber pension would be available to the spouse and on the death of both of them (subscriber and spouse), the accumulated pension corpus would be returned to his nominee.
  3. Pre-mature withdrawal before the age of 60 – Pre-mature exit (before the age of 60) is permitted only in exceptional circumstances like in case of death of the subscriber or terminal illness.

    In case of death of the subscriber before the age of 60 years, spouse would be given an option to continue contributing to APY account of the subscriber, for the remaining vesting period, till the original subscriber would have attained the age of 60 years.

Penalties in APY

In case of delay in premium payment of your Atal pension yojana account additional amount has to be paid. Rules for that are as follows-

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

Discontinuation of payments of contribution amount shall lead to following:

  • After 6 months account will be frozen.
  • After 12 months account will be deactivated.
  • After 24 months account will be closed.

Also note that there are some charges incurred for maintaining the APY account. If you stop paying the premium amount and the account balance becomes zero due to deduction of account maintenance charges, the APY account would be closed immediately.

APY Tax benefits

As per the update in 2016, APY provides the same benefits as NPS. Which means that premium amount paid can be claimed under section 80CCD. Current Limit for 80CCD tax exemption is Rs. 50 thousand.

Reference: https://npscra.nsdl.co.in/nsdl/scheme-details/APY_Scheme_Details.pdf

That's all for this topic Atal Pension Yojana - APY. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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