Atal Pension Yojana Tax Benefits

Oct 11, 2019 Alankit Team Atal Pension Yojana

The government-backed pension scheme in the country, Atal Pension Yojana is mainly aimed to deliver a stabilized pension to the unorganized sector. There were no tax benefits to be availed during the time it was initiated. At present, APY is designed like NPS for tax benefits.

Advantages/Features of Atal Pension Yojana

The scheme that provides benefits and social security to the individuals working in an unorganized sector comes with the features listed below:

  1. Any Indian citizen aged between 18 – 40 years can join the scheme
  2. It is must to have savings account for this scheme
  3. The APY scheme can be opened by visiting the same bank where the saving account is
  4. The subscriber will receive the pension after he turns 60 years of age
  5. If the subscriber dies, the spouse will be benefited from the pension
  6. Monthly pension of INR. 1,000/- to INR 5000/- is assured to the subscriber
  7. Nominee details are mandatory for an APY account. In the case of married subscribers, the spouse will become the nominee. If the subscriber is unmarried, he can nominate any person and has to provide the details of his spouse after marriage
  8. An individual under APY can opt to increase or decrease the pension amount at the course of the accumulation phase
  9. The Exit from APY before attaining 60 years will be permitted in exceptional situations like the event of death f the subscriber

Atal Pension Yojana Tax Benefits – During Investment

Earlier when the APY scheme came into effect, no tax benefits were introduced. Nevertheless, the Central Board of Direct Taxes (CBDT) hosted tax benefits under Atal Pension just like NPS Tax Benefits.

  1. APY or Atal Pension Yojana Tax Benefits under Sec.80CCD (1)

    Section 80 CCD (1) describes the policy related to income tax deduction accessible to an individual for contributions made to the NPS. This is regardless of the fact if private employee, government employee has made the contribution or a self-employed individual contributes for it. The provisions of Sec.80CCD (1) are applicable to the Indian citizens aged between 18-40 years, contributing to the NPS.

    • INR 1.5 Lakh of the maximum benefit can be availed (including Sec.80C limit)
    • The individuals contributing maximum 20% of annual income will be eligible for deduction (Previously it was 10%, after Budget 2017 it increased to 20%)
  2. APY or Atal Pension Yojana Tax Benefits under Sec.80CCD (1B)
    • Introduced in Budget 2015, this is an additional tax benefit of up to INR 50,000 eligible for deduction
    • An individual can avail the benefit of this Section 80CCD (1B) from Financial Year 2015-16
    • This deduction can be availed by both self-employed and employees
    • This is over and above Section 80CCD (1)

Atal Pension Yojana Tax Benefits - During Retirement

It is a taxable income for an individual received during the retirement which is treated as a salary income. This income is taxed according to the income tax slab during that time.

To sum up, the Atal Pension Yojana launched by the Government of India is a nice initiative that encourages people to save small amounts of their income so as to draw a pension in his old age.

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