Business Standard

Atal Pension Yojana: Benefits, eligibility and controversy explained

Atal Pension Yojana is a government-backed pension programme designed to provide a stable income to Indians post-retirement

nps savings national pension system

Surbhi Gloria Singh New Delhi
Launched on May 9, 2015, the Atal Pension Yojana (APY) aims at providing old age income security to all citizens, particularly to the people working in the unorganised sectors. Latest government data shows that the Atal Pension Yojana gained 7.9 million subscribers in the financial year 2023-24, increasing the total to more than 60 million.

What is Atal Pension Yojana

The scheme is a government-backed pension programme designed to provide a stable income to Indians post-retirement, targeting primarily the unorganised sector. It guarantees a monthly pension ranging from Rs 1,000 to Rs 5,000, along with tax advantages. The government contributes to the scheme, making it a risk-free investment for future security. Managed by the Pension Fund Regulatory and Development Authority (PFRDA), APY is a voluntary savings mechanism that encourages individuals to save for their retirement, ensuring they can face illnesses, accidents, or diseases in later life without financial worry.

Objectives behind the scheme

The primary goal of the Atal Pension Yojana is to offer protection and security to citizens against the financial strains caused by health issues, accidents, or diseases during old age. It specifically targets individuals in the unorganised sector, providing them with a safety net. Upon the demise of a beneficiary, the pension transfers to their spouse, and upon the passing of both, a lump sum is handed to a nominee.


Eligibility criteria for APY

To be eligible for the APY, applicants must be
Indian citizens aged between 18 and 40 years
Possess an active mobile number
Have a bank account linked to their Aadhaar
Must not be part of any other social security scheme
Must commit to contributing to the APY for a minimum of 20 years.

Beneficiaries of the Swavalamban Scheme who transition to the APY are also eligible.

How to apply for Atal Pension Yojana

Applicants can obtain the APY account opening form from participating bank branches or download it from the official websites of these banks or the PFRDA. The process involves filling out the form, submitting it at a bank, and providing a mobile number and Aadhaar card photocopy. The form is available in multiple languages for broader accessibility. Once the application is approved, applicants receive a confirmation message.

Step-by-step guide to filling the Atal Pension Yojana form

Step 1: Address the form

— Address the form to the Branch Manager of your bank. You can find the name by contacting or visiting the bank.
— Write down the name of your bank and the specific branch.

Step 2: Enter bank details

— Use BLOCK letters for clarity.
— Essential details include your bank account number, the name of your bank, and the branch name. This section is mandatory.

Step 3: Provide personal information

— Indicate your title (Shri for males, Smt for married females, and Kumari for unmarried females) by ticking the appropriate box.
— Married individuals should add their spouse's name.
— Fill in your full name, date of birth, and age.
— Include your mobile number, email address, and Aadhaar number.
— Designate a nominee and specify your relationship with them. This person will receive your contributions in the event of your death.
— If your nominee is a minor, mention their date of birth and the guardian's name.
— Declare whether the nominee is covered by any other statutory social security schemes and if they are an income taxpayer.

Step 4: Specify pension details
 
— Choose your desired monthly pension amount, which can be Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000, or Rs 5,000.
— Leave the 'Contribution Amount (Monthly)' section blank; the bank will fill this in after calculating your monthly payment based on your entry age.

Step 5: Declaration and authorisation
 
— Enter the date and location at the bottom of the form.
— Sign the form or use a thumb impression to certify that you understand the APY's terms and conditions and that all provided — information is accurate to your knowledge.

You also agree to notify the bank of any changes to this information and affirm that you do not have an account under the National Pension System (NPS). False or incorrect information can lead to liabilities.

Step 6: Bank’s section
 
The final part of the form, titled 'Acknowledgement - Subscriber Registration for Atal Pension Yojana (APY),' is for bank use. After submitting the form, a bank official will fill out this section, confirming your enrollment in the APY scheme.

Contributions to the Atal Pension Yojana

The amount you contribute monthly towards the Atal Pension Yojana (APY) hinges on two crucial factors: the monthly pension you desire at retirement and your age when entering the scheme. These contributions are tailored to ensure you can receive a fixed pension ranging between Rs 1,000 and Rs 5,000 monthly, starting at 60.

Withdrawing from Atal Pension Yojana

Originally, the APY scheme stipulated that beneficiaries could only exit upon reaching the age of 60. However, modifications have been introduced to accommodate early withdrawals under specific conditions, such as terminal illness or death before reaching 60. In these cases, the spouse of the deceased is entitled to the pension. If both the account holder and spouse are deceased, the nominee receives the pension. For accounts inactive due to non-payment, the following applies:

— A 6-month non-payment period results in account freezing.
— A 12-month non-payment period leads to account deactivation.
— A 24-month non-payment period results in account closure.

Advantages of Atal Pension Yojana

— Guaranteed minimum pension by the Indian Government.
— Eligibility for tax benefits under Section 80CCD for contributions made.
— Open to all bank account holders.
— Pension commences at the age of 60.
— Eligibility extends to private sector employees without pension benefits.
— Post-death, the spouse can claim contributions or continue in the scheme.

Age restrictions permit individuals aged 18 to 40 to invest, making it an ideal option for college students aiming to build retirement funds. A minimum of 20 years of contributions is required.

Assured pension and contribution flexibility

Participants can opt for a pension between Rs 1,000 to Rs 5,000, influenced by their contribution amount. The scheme allows annual adjustments to contributions, enabling participants to increase or decrease their investment based on their financial capacity to secure a larger pension upon retirement.

Withdrawal norms

At 60, beneficiaries can annuitise their corpus amount for a monthly pension. Early exit is restricted to death or terminal illness scenarios, with provisions for the spouse to continue or exit the scheme. Exiting before 60 results in a refund of contributions and accrued interest.

Tax benefits

Under Section 80CCD of the Income Tax Act 1961, contributions towards APY are tax-exempt, with a maximum exemption limit set at 10% of the individual’s gross income or Rs 150,000. An additional Rs 50,000 exemption is available under Section 80CCD (1B). However, it's recommended to consult a tax professional to fully understand and apply for these exemptions.

Atal Pension Yojana controversy

Business Standard reported on March 25 that nearly one of three subscribers who dropped out of the APY, did so because their accounts were opened without their “explicit” permission. The report was based on a sample study by the Indian Council of Social Science Research (ICSSR).

According to ICSSR, bank employees did so without their concurrence to achieve enrolment targets set for them.

While 32 per cent of the subscribers dropped out due to the bank opening the APY account without permission, 38 per cent did so because they needed money, and 15 per cent did not have the money to run the account, ICSSR reported.

In response to the report, Congress leader Jairam Ramesh said in a post on X: "Modi govt's ‘flagship social security programme’ is a very poorly-designed scheme, a paper tiger that needs officials to hoodwink and coerce people into participating in it".

Nearly 83 per cent of the subscribers are in the lowest slab of Rs 1,000 pension, because the monthly contribution for it is low and it goes “unnoticed” by the beneficiaries, he said.

For subscribers, the amount of return is not very attractive since it is a fixed income pension, which loses value with rising prices, Ramesh said.

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First Published: Apr 03 2024 | 11:55 AM IST

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