Atal Pension Yojana Eligible For Same Tax Benefits as National Pension System

APY or Atal Pension Yojana, which was previously known as Swavalamban Yojana is a guaranteed pension scheme initiated by the government of India. It is administered by the Pension Fund Regulatory and Development Authority (PFRDA) and implemented across India through banks.Under the scheme, the subscribers get guaranteed minimum pension based on their contributions. It is specifically launched for the benefit of the workers from the unorganised sector, including drivers, home maids, gardeners, etc.The scheme's primary goal is to ensure that all Indian citizens get an opportunity to secure their future and have a steady stream of income through pension post-retirement. Having a regular income source gives you a sense of security during the old age, especially to meet the medical expenses. The Atal Pension Yojana is open for all private-sector employees or those working in an organization that does not provide them with pension benefits.Currently, there are five pension slabs of Rs. 1000, Rs. 2000, Rs. 3000, Rs. 4000 and Rs. 5000 per month. You are eligible to receive the pension when you attain the retirement age (60 years). The pension you receive is decided based on your age and the contribution amount. In the event of your unfortunate demise, your spouse is eligible to receive the pension.

To avail of the Atal Pension Yojana benefits, you must meet the following requirements:

• You must be a citizen of India
• You must be aged between 18-40 years at the time of enrolling for the scheme.
• You must contribute for a minimum period of 20 years.
• You must have a bank account, and it must be linked to your Aadhaar card.
• You must have a valid mobile number.

Just like NPS , as a subscriber to APY, you are eligible to avail of tax benefit on the contribution made towards your pension account subject to a specific limit. And, the tax benefit ceiling depends on whether you are a salaried employee or a self-employed professional.No matter, if you are employed with a government organisation or a private organisation, your contributions towards Atal Pension Yojana is eligible for tax benefit to a maximum limit of Rs. 1.5 lakhs in a year under Section 80CCD (1) of the Indian Income Tax Act . However, you must note that the deduction shall not exceed 10% of the basic salary, including dearness allowance, but excluding other allowances.If you are a self-employed professional, your contributions to APY up to 20% of your Gross Annual Income is eligible for tax benefit under Section 80CCD (1) of the Income Tax Act subject to a ceiling of Rs. 1.50 lakhs under Section 80CCE.Similar tax treatment is applicable to an investment in the National Pension System.Apart from the tax benefit guaranteed under Section 80CCD (1), you can avail of an additional tax benefit up to a maximum limit of Rs. 50,000 on your contributions towards Atal Pension Yojana under Section 80CCD (1B). The deduction is applicable for both salaried employees and self-employed. However, you must note that you cannot claim the same amount under both sections.

When you attain the retirement age (60 years), you are eligible to withdraw a portion of the accumulated funds from your Atal Pension Yojana account. Just like NPS, the amount you withdraw from an APY account is tax-exempt.Unlike in NPS, where you can use up to 40% of the funds in your account to purchase an annuity, in APY, the government decides the annuity amount to provide you with a monthly pension. The pension income you receive is considered part of your monthly income, and it is taxable as per your regular tax slab .

• Since you make periodic contributions to APY, the amount will be automatically debited from your bank account on a specific date of the month. Hence, it is advisable to maintain sufficient balance in your account before each debit.
• You can increase the contributions to the Atal Pension Yojana at any time you want. You must visit the bank and instruct them to make the necessary changes in the debit amount.
• If you default on your payment, you are liable to pay a penalty of Rs. 1 per month for a contribution of every Rs. 100.
• If you fail to make the contributions for six months, your APY account will be frozen, and if you default for 12 months, the account will be automatically closed, and the balance amount will be paid back.
• Remember, Atal Pension Yojana is a pension scheme aimed to help you build a corpus for the future. Hence, withdrawals are not permitted during the contribution period. However, the only exception for withdrawal is if you need money for treatment of terminal illness. In the event of your unfortunate demise during the contribution period, the entire money is paid to the nominee.
• If you choose to close the APY account before attaining the retirement age, you will receive the entire amount equal to your contributions plus the interest accrued on the amount. You will not receive the government's contribution to the account and the interest earned on that amount.

No matter, if you have invested in other pension plans, it is advisable to have APY in your portfolio. You can make a nominal contribution towards your APY every month throughout your working tenure and build a decent corpus for the future. This will be a handy additional income during your old age, and you can create a decent retirement fund without putting much strain on your expenses.Ready to make the most of your money? Start your tax planning journey now!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.