In today’s fast-paced life and skyrocketing inflation, everyone is haunted by the fear of how they will manage their expenses when their limbs stop working. Risks in the stock market are always present, and bank interest rates fluctuate over time. Consequently, every Indian is searching for a haven where every penny invested is completely protected and a fixed monthly sum is received after retirement.
If you, too, are concerned about your future, the Central Government’s Atal Pension Yojana (APY) is a boon for you. Significant decisions taken by the Modi Cabinet from time to time regarding this scheme have further strengthened the trust of millions of people in it.
What is the Atal Pension Yojana
The greatest strength of the Atal Pension Yojana (APY) is its government protection and guaranteed returns. This is why a large number of young people are joining it to plan their retirement. Under this scheme, after reaching the age of 60, you receive a guaranteed pension of ₹1,000 to ₹5,000 per month, depending on your investment.
This scheme is especially a lifeline for those who do not have any other pension or social security cover. The money deposited in this scheme is directly under the supervision of the Government of India, so there is no risk of your investment being lost.
How much can you invest
The most important thing about this government scheme is that the earlier you start investing, the less burden the monthly contribution will have on your pocket. This can be understood with a simple example. If you join this scheme at the age of 18, you will need to deposit only ₹210 per month to receive a monthly pension of ₹5,000. This means that your daily expenses will be around ₹7.
Meanwhile, if you start this same investment at the age of 25, you’ll have to pay approximately ₹376 per month. If you join this scheme at the age of 40, your monthly premium will increase to ₹1,454 for the same ₹5,000 pension. Clearly, starting early allows you to create a substantial security net with a very small investment.
5 Benefits of APY
People often only consider the pension amount, but the benefits inherent in this scheme make it far superior and more powerful than any private investment option.
- The first and foremost advantage is the ironclad government guarantee. While returns from mutual funds or the stock market depend on market fluctuations, the APY pension is guaranteed by the Government of India itself. Even if future pension fund returns are low, the government will continue to contribute funds and provide you with the promised pension.
- The second advantage is significant tax relief. Deposits made under this scheme are eligible for a deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act. Additionally, an additional tax deduction of ₹50,000 can be availed under Section 80CCD (1B). This is a great combination of savings and tax savings.
- The third benefit relates to the protection of the nominee and family. If the pensioner dies, the pension continues to be paid to their spouse. If both pass away, the entire corpus accumulated over 60 years, or a substantial sum of approximately ₹8.5 lakh, is returned to the nominee in one lump sum.
- The fourth advantage is its transparency and convenience. You don’t need to visit the bank every month, as the money is automatically debited directly from your account. You can choose monthly, quarterly, or half-yearly payments as per your convenience. Additionally, you receive SMS updates on each investment.
- The fifth biggest benefit is the freedom to change the pension amount. You can increase or decrease your pension amount once a year, depending on your financial situation. For example, if your income increases, you can move your pension plan from the ₹1,000 slab to the ₹5,000 slab.
Who can open an account
Some basic rules are important to know to avail the benefits of this scheme. The applicant must be at least 18 years old and a maximum of 40 years old. An active savings bank account is also mandatory. An important rule is that after October 1, 2022, anyone who pays income tax cannot apply for this scheme. This scheme is primarily aimed at those who are outside the tax slab and who are most in need of financial support in old age.