A pension plan is a long-term investment in which you pay small, regular premiums over time to accumulate a retirement fund. A pension is essentially a tax-advantaged long-term savings plan. When you get tax relief on your pension, some of the money that would have gone to the government as taxes instead goes into your pension. The Atal Pension Yojana is a retirement plan aimed primarily at the unorganized sector. The scheme's goal is to ensure that no Indian citizen in their old age has to worry about illness, accidents, or diseases, providing a sense of security.
One of the most beneficial social security schemes introduced by the government in 2015-16 is the Atal Pension Yojana. People can contribute to their Atal Pension Yojana account until they reach the age of 60 and receive a monthly pension as part of the scheme.
Since then, the Atal Pension Yojana has helped many Indians plan for their retirement. The Pension Fund Regulatory and Development Authority (PFRDA) administers this scheme using the NPS (National Pension System) architecture.
Death benefits of Atal Pension Yojana (APY)
The pension automatically vests in the spouse who is the default nominee upon the contributor's death. In the event of the contributor's and spouse's deaths, the nominee will receive the predetermined corpus amount for the specific pension slab. If a contributor dies before reaching the age of 60, his or her spouse has the option of continuing the Atal Pension Yojana account and receiving benefits, or closing the account and receiving the contributions and gains made on it.
Upon the subscriber's death, his or her spouse is entitled to the same pension as the subscriber.
The department will inform subscribers about PRAN activation, account balances, contribution credits, and other topics that will be communicated to APY subscribers via SMS alerts. Once a year, the subscriber will receive a physical Statement of Account.
Retirement benefits of Atal Pension Yojana (APY)
The retirement benefit is the most important aspect of the Atal Pension Yojana. The monthly pension will be paid out based on the contributions made. There are five different pension amounts: Rs 1,000, 2,000, 3,000, 4,000, and 5,000 rupees. These pensions have different contribution amounts. The pension is paid to the spouse in the event of the subscriber's death. A subscriber can, however, choose to reduce or increase his or her pension amount once a year during the accumulation phase.
If investment returns are higher than the guaranteed returns embedded in APY, subscribers will submit a request to the associated bank for drawing the guaranteed minimum monthly pension or a higher monthly pension after 60 years.
Tax benefits on Atal Pension Yojana (APY)
The Atal Pension Yojana tax benefits can be claimed up to Rs. 50,000 over and above the Rs. 1.5 lakhs under Section 80CCD (1B). The subscriber's taxable income will be reduced as a result of this. In accordance with the maximum allowable deduction under section 80CCD(1) of the Income Tax Law, 1961 shall be 10 percent of gross total revenue covered by a maximum deduction of Rs. 1,50,000 p.a. Additional deductions under Section80CCD(1B) of the Income Tax Act1961, of Rs. 50 000 p.a. are eligible to be made for an additional contribution of Rs. 50 000 p.a. The total amount of deductions under sections 80C, 80CCC, and 80CCD(1), however, cannot exceed INR 1.5 lakhs, according to section 80CCE. In a financial year, the total deduction available under Section 80CCD (1B) plus Section 80C would be INR 2 lakhs.
Can a subscriber exit Atal Pension Yojana (APY) before the age of 60 Years?
It is possible to exit APY on your own terms. If a subscriber who has taken advantage of the Government co-contribution under APY chooses to voluntarily exit APY at a later date, he will only be refunded his contributions to APY, as well as the net actual accrued income earned on those contributions (after deducting account maintenance charges). Such subscribers will not receive the Government co-contribution or the accrued income from the Government co-contribution.