APY or Atal Pension can serve you in your sunset years with a contribution made by you in your working life. For the same, any Indian resident aged between 18-40 years can join the scheme and be entitled to a monthly pension of up to Rs. 5000 based on the earlier contribution made.
The incentive for early joiners
The scheme also provided an additional contribution of up to 50% by the government for those who enrolled under APY between June 1, 2015, and March 31, 2016. The benefit was however limited to individuals who were not covered under any of the retirement schemes or were not income taxpayers at the same time.
Here are the benefits from the scheme for the unorganized and low-income earners with steady income source in post working life:
1. Contribution for minimum and maximum pension:
For this, the amount allocation needed towards the scheme is very nominal say Rs. 42 per month for an individual aged 18 years and desiring a pension of Rs. 1000 and for a 40-year-old desiring a fixed monthly pension of Rs. 5000, the contribution could go as high as Rs. 1,454 per month. So, in a way you get defined pension amount as per your contribution.
The defined pension amount is paid once the subscriber attains 60 years of age.
For opening the account, you need to be maintaining a savings account with the bank or post office.
2. Tax benefits:
Apart from the 80C benefit of up to Rs. 1.5 lakh, the premium paid towards the scheme also qualifies for a deduction of up to Rs. 50,000 under Section 80CCD(1B) of the Income Tax Act.
But it is to be noted that pension receivable is to be taxed as per the slab of the taxpayer. So all in all the tax benefits from the scheme are similar to NPS.
3. Inflation-beating returns:
A return of 8-8.5% from any of the secured instrument is highly lucrative and well beyond the inflation which in the current time has remained well below the 3% mark when talking about retail inflation. And herein the subscriber gets an assured return of 8% per annum.
And all of the funds managing the APY corpus have managed to provide a compounded annual return of over 8%.