Atal Pension Yojana - Objectives, Application Process & Withdrawal

After successful implementation of Pradhan Mantri Jan Dhan Yojana and ensuring banking benefits to people by allowing them to open zero balance accounts, the Atal Pension Scheme was passed in 2015-16 by the then finance minister Mr. Arun Jaitley. 

This scheme is aimed at providing pension to the employees and workers of the unorganised sector.

Keep reading to learn more about Atal Pension Yojana. 

What is Atal Pension Yojana?

The Government of India launched the Atal Pension Yojana in 2015-16. Objectives of Atal Pension Yojana is to mainly create social security for every Indian by providing pension benefits to the unorganized sector employees, traders, self-employed individuals and agriculturists. 

Atal Pension Scheme came as a replacement for Swavalamban Yojana which was not accepted by general people. 

• This scheme is an extension of the well-known National Pension Scheme and is regulated and controlled by Pension Funds Regulatory Authority of India (PFRDA). 
• APY works towards ensuring that no Indian citizen needs to worry about accidents, diseases and illness when they get old. Anyone who works in the private sector or someplace where they do not offer pension benefits are eligible to apply for this scheme.
• This social security scheme aims to provide a steady stream of income after crossing the 60 year mark. APY guarantees a minimum monthly pension of ₹1000, ₹2000, ₹3000, ₹4000 or ₹5000 to the beneficiaries of this scheme. 
• Pension amount will depend on the individual’s age as well their contribution.
• Subscribers of this scheme should not be involved in any other statutory social security schemes like Employee Provident Fund or pay taxes to avail the benefits of this scheme. 

Objectives of Atal Pension Yojana

The main objective of this scheme is to alleviate basic financial obligations of people that might crop up after retirement by motivating them to save from an early age. Beneficiaries of this scheme receive their accumulated corpus in the form of monthly pension payments. 

This scheme motivate employees of the unorganised sectors to save voluntarily for their life after retirement.

Spouse of the beneficiary can claim the pension in case of the beneficiary’s death. In case of death of both, the beneficiary and their spouse, the nominee receives the accumulated amount in lumpsum. 

However, if the accountholder dies, then the spouse can either opt to continue the scheme for the remaining tenure or exit the scheme.

Earlier pension schemes like Swavalamban scheme were not able to address the peculiar demographic setting of India. They were unable to guarantee a minimum pension provision and could not cover many people due to vagueness of benefits. 

A large chunk of the labour force that builds the unorganised sector was not covered properly by the earlier schemes. This resulted in the formation of this integrated scheme known as Atal Pension Yojana, to meet the needs of the people.

Features of Atal Pension Yojana

Following are some of the key features of Atal Pension Yojana: Age Limit People above the age of 18 years and below 40 years can invest in Atal Pension Yojana. As the minimum age limit is 18 years, even college students can decide to invest in this scheme to accumulate a corpus for their future. However, 40 years is the maximum age limit to apply for this scheme as the contributor will get at least 20 years to contribute to this scheme. Auto-Debit Mechanism This is one conveniences of the APY scheme. In this scheme, you need to link your bank account with your pension account and the monthly contributions will directly be debited from your bank account. However, for this facility to run smoothly you need to make sure that you have sufficient balance for automatic debit, failing which you will be penalised. Increase Contributions The pension amount depends on the contribution of the beneficiary. Therefore, different contributions lead to different pension amounts. It can so happen that you decide to make larger contributions when you have increased financial capacity so as to receive higher pension amounts later. To fulfil this requirement, government is offering the facility to increase or even decrease your contribution once a year to change the accumulated corpus amount. Guaranteed Pension You can opt to receive a pension between ₹1000 to ₹5000 periodically and this will be on the basis of your monthly, quarterly or half-yearly contributions. Due date for your monthly contribution will be set as per the date you contribute for the first time. For example, if you contribute on February 02 for the first time, your next due date will be March 02 and so on.

Eligibility for Atal Pension Yojana

In order to invest in Atal Pension Yojana and receive a pension from this scheme, you need to fulfil the following Atal Pension Yojana eligibility criteria:

• You need to be a citizen of India;
• You should be between the age limit of 18 to 40 years;
• To be eligible, you should be able to contribute to this scheme for a minimum of 20 years;
• Further, you need to own a valid mobile number;
• You should not have an existing Atal Pension Yojana account;
• You should compulsorily have a bank account linked with your Aadhaar card;
• People who were previously enrolled under Swavalamban Yojana will be automatically migrated to this scheme.

Other than these requirements, a beneficiary should not be part of any other social welfare schemes to be eligible for APY.

Documents Required for AP

Let us now take a look at the list of mandatory documents required for Atal Pension Yojana

• Proof of identity like an Aadhaar Card or Voter Card.
• Proof of address like Voter Card, Aadhaar Card etc.
• Proof of date of birth like Birth Certificate or SSLC Certificate.
• Account number of your savings bank account.

Apart from all the documents mentioned above, you will also require an active contact number in which you will receive confirmations and other details.

How Can You Apply for Atal Pension Yojana?

All banks in India are empowered to open your pension account under Atal Pension Yojana. You can open an Atal Pension Yojana account both online and offline. 

Here are the steps that you can follow if you wish to enrol in APY and open an account online:

Step 1: Visit the official website of the bank in which you hold a savings account.

Step 2: Log in with your net banking credentials. 

Step 3: Download APY application form. 

Step 4: In the form, provide the name of your nominee and details like whether you are entitled under any social security scheme and whether you are an existing taxpayer. 

Step 5: Choose the pension that you want ranging between ₹1000 to ₹5000.

Step 6: e-Sign the form and submit it online. You can either pay directly from your net banking account or link your account to your APY account and ensure that a fixed amount is auto-debited every month.

If you are not comfortable online, you also have the option to enrol in Atal Pension Yojana offline. Here are the steps for the same:

Step 1: Visit the bank branch where you have an account.

Step 2: Fill up the APY application form with all the necessary details like account number, Aadhaar number and mobile number.

Step 3: Submit the form along with photocopies of your Aadhaar card. 

Step 4: Your first contribution will be deducted from your linked bank account after the APY account is opened. 

Step 5: Bank will issue an acknowledgement number or PRAN number after a successful account opening. 

Step 6: During the entire tenure of this scheme, your contribution will get automatically debited from your account.

In case you are facing any trouble filling up the application form for Atal Pension Yojana, here is the simplest way to fill up the form section-wise:

Step 1: Addressing section

Enter name of the branch manager, bank name and branch.

Step 2: Bank details section

Provide your bank details like account number, name of bank and branch.

Step 3: Personal details section

Provide basic details like your name, date of birth, age, mobile number, email address, Aadhaar number, name of your spouse (if applicable), name of nominee, relation of nominee with beneficiary, Aadhaar number of both spouse and nominee. 

In case nominee is a minor, provide their date of birth and their guardian’s name. Also mention whether you are part of any statutory social security scheme and whether you are a taxpayer or not.

Step 4: Pension details section

Mention whether you wish to contribute monthly, quarterly or half-yearly. You need to keep the next section blank regarding how much you wish to contribute as this will be decided by the pension you want to receive and your age.

Step 5: Declaration and authorisation

In this section, fill up the place and date and sign in the space available to confirm the terms and conditions of the Atal Pension Scheme. 

Step 6: Acknowledgement section

This section is to be filled by the bank. After you submit the form, the bank agent will fill in this section and return this portion to you. This will work as proof that you will become a subscriber to this scheme.

Monthly Contribution for Atal Pension Yojana

Your monthly contribution depends on your preferred monthly pension along with final corpus amount and your age when you are enrolling into the scheme. 

For example, if you are 28 years old and need a monthly pension of ₹4000, you will need to contribute ₹388 every month for 20 years to receive that ₹4000 pension per month when you turn 60. This is because 60 is when your pension starts getting credited to your bank account.

Benefits of investing in Atal Pension Scheme

Atal Pension Yojana offers a wide range of benefits for its beneficiaries. Here are some of the major Atal Pension Yojana features and benefits:

• Source of income after retirement

By investing in APY, people are provided with a steady source of income in their old age after retirement. Therefore, they become financially capable of fulfilling their basic requirements in old age.

• Government backing

This scheme receives the backing of the government and is regulated by PFRDA. Therefore, there is no risk in relation to the scheme as government will be paying the pension.

• Nomination facility

You can also avail the facility of naming a nominee. In case of death of both the subscriber and their spouse, the nominee can receive the entire corpus amount.

• Opportunity for unorganised sector

This scheme caters to citizens employed in unorganised sectors. It helps in alleviating their financial worries and enabling them to become financially independent in their life after retirement.

Penalties for defaulting your APY payment

In case you are unable to pay and there is no sufficient account balance for auto-debit, your bank will levy some additional charge in the form of a penalty as follows:

• In case you need to contribute ₹100 per month, a penalty of ₹1 will be applicable.
• If you contribute anything between ₹101 to ₹500 per month, penalty of ₹2 will be applicable.
• A penalty of ₹5 will be applicable in case you contribute something between ₹501 to ₹1,000 every month.
• In case your contribution is above ₹1,001 every month, a penalty of ₹10 is applicable.

Where does your money go?

Here’s how funds collected from all subscribers are invested: 

Government securities: minimum 45% and maximum of 50%.

• Debt securities and term deposits of bank: minimum  35% and maximum of 45%.
• Equities and instruments related to it: minimum of 5% and maximum of 15%.
• Money Market Instruments: Maximum of 5%.
• Asset-Backed Securities etc: Maximum of 5%.

How can you withdraw from Atal Pension Scheme?

60; however, exit is possible in case of terminal diseases or death. Following are the actual exit scenarios:

• You need to go to the bank and apply for full annuitisation of your pension when you turn 60.
• In case of an unfortunate death of beneficiary or extraordinary circumstances like terminal sickness, you can exit the scheme before you turn 60. In case you die before you turn 60, your spouse will receive the entire corpus or have the option to continue making contributions until end of the tenure. A if you and your spouse both die, your nominee will receive the corpus.

Tax Benefits of Atal Pension Yojana

Atal Pension Yojana is a government-sponsored pension scheme. Therefore, it offers tax exemption benefits according to section 80C of the Income Tax Act of 1961. 

As per section 80CCD (1), government allows a maximum exemption of ₹1.5 lakh. As per section 80CCD(1B), an additional exemption of ₹50,000 for your contribution to the scheme is also allowed.

Takeaway

Atal Pension Yojana works as a tool to plan your finances for your old age. It is like a jackpot plan for employees of the unorganised sectors as they get an opportunity to reap the benefits of pension after retirement by investing an amount which is affordable for all. 

This social security scheme can work wonders for people who wish to put aside a portion of their earnings for better use in their future.