Atal Pension Yojana Tax Benefits

The Atal Pension Yojana (APY), formerly known as Swavalamban Yojana, is a social security pension scheme offered by the Government of India. The objective of APY is to bring workers in the unorganised sector under the umbrella of a government-backed pension scheme. The government introduced the Atal Pension Yojana in the 2015-16 Budget session in honour of former prime minister Atal Bihari Vajpayee.

The Pension Fund Regulatory and Development Authority (PFRDA) administers the scheme. To subscribe to it, you must be an Indian citizen aged between 18 and 40 years. APY offers you a regular pension in the range of Rs. 1,000 to Rs. 5,000 per month based on your monthly contribution to the scheme.

APY Tax Benefits

As a subscriber, you can enjoy APY tax benefits under Section 80CCD of the Income Tax Act, 1961. The Income Tax Department released a circular in February 2016, stating that the contribution extended towards APY will have similar tax deductions as the National Pension Scheme (NPS).

The maximum deduction allowed under section 80CCD (1) of the Income Tax Act, 1961 is 10% of gross total income subject to a maximum deduction of Rs. 1,50,000 p.a. as specified under section 80CCE of the Income Tax Act. An additional contribution of Rs. 50,000 p.a. is eligible for an additional deduction of Rs. 50,000 p.a. under section 80CCD(1B) of the Income Tax Act, 1961. These deductions are subject to the fulfilment of the conditions mentioned in the Income Tax Act, 1961.

Taxpayers Not Eligible w.e.f. October 2022

The Ministry of Finance, in a notification dated August 10, 2022, announced that income taxpayers would not be eligible to enrol in Atal Pension Yojana with effect from October 1, 2022. However, taxpayers already registered with the scheme can continue to avail the existing tax benefits.

Final Thoughts

Your contributions to Atal Pension Yojana will get the same tax benefits as the NPS. The government’s primary objective with APY is to provide a pension scheme to the unorganised sector workers. If you are a taxpayer, you can opt for the National Pension Scheme, which offers higher pension amounts after retirement. You can also choose to invest in the Public Provident Fund to generate guaranteed tax-free returns at a higher rate of interest.

FAQs about Atal Pension Yojana Tax Benefits