Atal Pension Yojana vs NPS: A Comparative Guide

Post-retirement days are when you don’t have an active work life, and your income shrinks. However, even then, you have certain basic expenses, including medical costs. To ensure that you have a financially stable life when you have grown senile, you need to start saving from the very beginning of your working life. 

There are several government-backed investment schemes to help you create a retirement corpus. Atal Pension Yojana and National Pension Scheme are two such pension schemes under the government’s jurisdiction. However, before investing in any of them, you must thoroughly know both. Moreover, since both are pension schemes, you might wonder: Atal Pension Yojana Vs Nps – which is better?

To decide which method suits your financial needs, you need to know the similarities and differences between Atal Pension Yojana and NPS. The following article aims to give a detailed explanation regarding the same so that you can choose the perfect scheme.

Note: Income taxpayers are not eligible to register for APY (Atal Pension Yojana) w.e.f. October 1, 2022.

Also Read: Section 80CCD: Deductions For NPS And APY Contributions

What is the NPS Scheme?

The National Pension Scheme was launched on 1st January 2004. It is a national social security initiative by the Indian government to inculcate the habit of savings among salaried employees. 

Initially, this scheme was meant only for government employees, except armed forces personnel. But this scheme was revised on 1st May 2009 and made available for all citizens of the country, on a voluntary basis, including the unorganised sector. Under this scheme, the contribution made by the subscribers is invested in market-linked instruments such as debt and equity. Hence, the returns are dependent on the performance of these instruments. 

The scheme will mature when you turn 60. You may then withdraw 60% of your accumulated amount. The remaining 40% must be kept aside to receive a regular annuity. 

Also Read: Atal pension yojana tax benefits

What is the APY Scheme?

Note: Income taxpayers are not eligible to register for APY (Atal Pension Yojana) w.e.f. October 1, 2022.

The Atal Pension Yojana scheme, administered by the Pension Fund Regulatory and Development Authority, was launched in the 2015-16 financial year; hence, it is relatively new compared to NPS. 

This scheme was implemented to safeguard the retirement interests of people working in the unorganised sector. It provides a guaranteed pension amount ranging from Rs. 1,000 to Rs. 5,000, depending on the contribution amount. However, you will start receiving your pension after you reach 60.

Also Read: What is the Eligibility for Atal Pension Yojana?

Difference Between Atal Pension Yojana and National Pension Scheme

Now, you might be wondering, NPS vs APY – which one is better?  A table highlighting the differences between NPS and APY has been given below to make the decision easy. 

Similarities between APY and NPS

A comparison between APY and NPS reveals that, though there are differences between APY and NPS, these two schemes have a few similarities too:

• APY and NPS are retirement-oriented investment plans which can help you save a good deal of money for your post-retirement days. 
• Both of them are pension schemes.
• The PFRDA, or Pension Fund Regulatory and Development Authority, regulates both plans.
• The contributions to the schemes are subject to a tax deduction of a maximum amount of Rs. 1.5 lakhs, under Section 80 CCD (1). Furthermore, you can claim an additional tax deduction under Section 80 CCD (1B) for contributions made up to Rs. 50,000. This tax benefit is available for both schemes. 
• The pension received under these schemes is taxable per your income tax slab rate. 

Also Read: Everything You Should Know about Atal Pension Yojana Age Limit

Final Thoughts

How often have you heard the proverb – ‘Make hay while the sun shines?’ To turn this proverb into a reality in your life, you must prepare yourself for your post-retirement days while you are still strong and working.

Both APY and NPS are pension schemes which ensure a fixed income for the post-retirement days for people working in both organised and unorganised sectors. If your query has been NPS vs Atal Pension Yojana – which is better? This article might have given you a clear idea of the similarities and differences between these two schemes.

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