This page provides all the details you need to know about the Atal Pension Scheme (APS).
Table of Contents
- What is APS?
- History of APS
- Objective of APS
- How does APS Work?
- Income Tax Benefits
- Who can Open the Account?
- Contributions from Government
- How much Pension will I Get?
- How much Retirement Wealth will My Nominees Get?
- Can I Change My Monthly Pension and Contribution Frequency?
- Can I Get More than the Minimum Guaranteed Monthly Pension?
- How much Amount should I Contribute?
- Delayed & Discontinued Contributions
- Who Regulates APS?
- Where does Government Invest Your Contributions?
- Annual Interest Rate (%) and Compounding Frequency
- Pre-mature Closure
- What if You Die Before 60 Years of Age?
- Account Status
- Account Transfer
What is APS?
APS stands for Atal Pension Scheme. APS is a retirement scheme for all Indian citizens.
It was established by the Government of India to provide guaranteed monthly pension to all Indians after the age of 60 years.
Though this scheme is for all Indians, it mainly aims at poor, under-privileged and workers in the unorganised sector.
History of APS
During the budget for financial year 2015-16, the Prime Minister of India announced various Pension and Insurance schemes for all Indian citizens. Of which, one such scheme was "Atal Pension Scheme".
Atal Pension Scheme was launched by the Government of India and it was effective from 01-June-2015 onwards.
This scheme was named after the former Prime Minister of India Mr. Atal Bihari Vajpayee.
Objective of APS
The main objective of APS is to provide guaranteed monthly pension to people of unorganised sector after the age of 60 years.
Encourages all Indian citizens to plan for their retirement life.
How does APS Work?
Open APS account in a Bank
Choose the monthly pension you want to receive after the age of 60 years. You can choose one of the monthly pensions of Rs. 1,000, Rs. 2,000, Rs. 3,000, Rs. 4,000 or Rs. 5,000
According to your chosen monthly pension, the contribution amount will be decided. You can pay the contribution monthly, quarterly or half-yearly basis
Pay the contribution amount as per the chosen payment frequency till you reach 60 years of age
After 60 years of age, you will receive the guaranteed monthly pension till the end of your life
After that, your spouse will receive the same guaranteed monthly pension till the end of her/his life
After that, your Nominees or Legal Heirs will receive the accumulated pension wealth. That is, your contributions and returns earned on them. This amount is pre-defined when you join the scheme
Established by the Government of India
Pension scheme for all Indian citizens
guaranteed minimum monthly pension to you and your spouse
your nominees will receive the accumulated pension wealth following the death of both you and your spouse
Income tax benefits
additional contributions from Government for the people of unorganised sector
Income Tax Benefits
This scheme didn't have any income tax benefits when the scheme was launched.
But, in February 2016, the Government of India announced that this scheme will get income tax benefits. The tax benefits will be same as that of NPS (National Pension System) scheme.
Effective 01-Apr-2020, the income tax benefits will depend upon whether you choose old tax system or new tax system.
Old Tax System:
Your contributions during a financial year will be eligible for tax deduction under Section 80CCD(1). This is within the overall limit of Rs. 1.5 Lakh under Section 80C.
Your contributions up to Rs. 50,000 per financial year will be eligible for additional tax deduction under section 80CCD(1B). This is over and above the limit of Rs. 1.5 Lakhs under Section 80C.
Monthly Pension received during your retirement life is taxable. You need to declare the monthly pension amount under "Income from other Sources" and pay income tax as per your income tax slabs.
New Tax System:
No income tax benefits. Your contributions won't get any deduction benefits under Section 80CCD(1) or 80CCD(1B).
Monthly Pension received during your retirement life is taxable. You need to declare the monthly pension amount under "Income from other Sources" and pay income tax as per your income tax slab.
Who can Open the Account?
The following are the eligibility criteria to join APS scheme.
You should be an Indian citizen
You should have a Savings Bank (SB) Account with Bank or Post Office. You can open a new account if you don't have one already
Your age should be between 18 years and 40 years
During the account opening, it is recommended to provide Aadhaar Card details and Mobile Number. But, they are not compulsory for account opening. You can provide them at a later stage.
The purpose of the Aadhaar card is for the identification of yourself (account holder / beneficiery), your spouse and your nominees to avoid pension issues and lump sum retirement wealth receival issues in the long term.
How many accounts can I open?
At any time, you can open only ONE account and it is unique throughout your life.
I am a member of EPF / NPS / PPF. Can I join APS?
Yes. You can join APS.
APS is independent of other retirement and provident fund schemes. So, you can join APS even if you are a member of other retirement schemes like EPF, NPS, PPF, etc.
Contributions from Government
When the scheme was launched, the Government announced that it will make co-contributions to attract people to join this scheme. This is in addition to the your (account holder) contribution amount.
Who is eligible?
To be eligible for Government contributions, you should meet the following criteria.
you should open APS account during the period from 01-June-2015 to 31-March-2016 (It means that those who join on or after 01-Apr-2016 will not receive this benefit)
you are not an income tax payer
You are not covered under any other social security scheme or employees provident fund schemes
Who is not eligible?
You are not eligible for Government's co-contributions if you meet any one of the following criteria.
You joined the scheme on or after 01-Apr-2016
You are an income tax payer
You are covered under any of the social security schemes or employees provident fund schemes
How much Government will contribute?
For the eligible account holders, the Government will make co-contribution for the following 5 financial years.
The Government contribution will be 50% of your total contribution for the financial year or Rs. 1,000/- whichever is lower.
For example, you are 30 years old and you want to receive monthly pension of Rs. 5,000/- and you want to pay contributions on a monthly basis. As per the APS contribution chart, your monthly contribution amount will be Rs. 577/-. So, your total contribution for the financial year will be Rs. 6,924/- (that is 577 x 12). In this case, Government's co-contribution will be Rs. 1,000.
The Government deposits the co-contribution amount into your Savings Bank (SB) account in Bank or Post Office at the end of the financial year. Then, it will be transferred to your APS account by the Bank.
How much Pension will I Get?
Under APS scheme, you have the following 5 pension options. You can choose one of the options when you open APS scheme.
Monthly pension Rs. 1,000
Monthly pension Rs. 2,000
Monthly pension Rs. 3,000
Monthly pension Rs. 4,000
Monthly pension Rs. 5,000
How much Retirement Wealth will My Nominees Get?
After your death and your spouse's death, your nominees will receive the lump sum retirement wealth.
The wealth chart is given below and it depends upon the chosen monthly pension.
Rs. 1,70,000 (for monthly pension of Rs. 1,000)
Rs. 3,40,000 (for monthly pension of Rs. 2,000)
Rs. 5,10,000 (for monthly pension of Rs. 3,000)
Rs. 6,80,000 (for monthly pension of Rs. 4,000)
Rs. 8,50,000 (for monthly pension of Rs. 5,000)
Note that the retirement wealth is pre-defined when you join the scheme itself.
Can I Change My Monthly Pension and Contribution Frequency?
Yes. You can change. The details are given below.
Can I change my monthly pension after opening the account?
Yes. You have the option to change the monthly pension amount after you joined the scheme.
But, you can do this only once in a financial year and that can be done on any month.
Note that your contribution amount will change according to the monthly pension you opted for.
Can I change my contribution frequency after opening the account?
Yes. You can change the contribution frequency (monthly, quarterly or half-yearly) as per your convenience during the term of the scheme.
But, you can do this only once in a financial year and that can be done on any month.
Can I Get More than the Minimum Guaranteed Monthly Pension?
May be. There may be a possibility to get more than the guaranteed minimum monthly pension. But, it depends upon the returns earned from your contributions.
If the returns from your contributions is higher than the minimum guaranteed monthly pension, then the Government will deposit the additional returns into your account. It means more pension for you.
Worst case, if the returns from your contributions is lower than the minimum guaranteed monthly pension, then Government will bear the loss and you will still get the guaranteed minimum monthly pension.
It means that your monthly pension is guaranteed irrespective of the returns earned from your contributions.
How much Amount should I Contribute?
The contribution amount that you should pay will depend upon the following factors.
the monthly pension you want to receive
your age at the time of joining APS scheme
whether you want to pay the contribution amount monthly, quarterly or half-years basis
You can use our Financial Calculator India App to find out your contribution amount.
Once your contribution amount and the contribution frequency are decided, the contribution amount will be debited from your Savings Bank account through "Auto Debit" facility by the Bank and it will be transferred to your APS account.
Delayed & Discontinued Contributions
Penalty for Delayed Contributions:
You have to make sure that you have sufficient balance in your Savings Bank (SB) account for the contribution amount to be debited by the Bank on the specified date.
If the Bank is unable to debit the contribution amount due to "insufficient balance", then Bank will charge you penalty amount as per the following.
For each delayed monthly contributions, Rs. 1/- per month for every Rs. 100/-, or part of it
For each delayed quarterly and half-yearly contributions, the penalty will be calculated accordingly
Note that the penalty amount collected will be deposited into your APS Account. It means that the Government will not take the penalty charges.
What if you discontinue your contributions?
If you discontinue your contributions, your accumulated amount in APS account will get reduced because of deduction of account maintenance charges and fees.
Due to these deductions, if the APS account balance becomes zero Rupees, your APS account will be closed immediately.
If you have received co-contributions from Government, it will be paid back to the Government.
How to activate discontinued contributions?
You have the option to pay delayed contributions along with penalty if the APS account balance is NOT zero Rupees.
But, once it becomes zero, your account will be closed immediately and you have no way of continuing further.
Who Regulates APS?
APS is regulated by PFRDA (Pension Fund Regulatory and Development Authority) through NPS (National Pension System) architecture.
Where does Government Invest Your Contributions?
The Government of India invests people' contributions in the following manner.
Government Securities - 45% to 50%
Debt Securities and Term Deposits of Banks - 35% to 45%
Equity and related instruments - 5% to 15%
Money Market Instruments - 0% to 5%
Asset Backed Securities - 0% to 5%
Annual Interest Rate (%) and Compounding Frequency
Government of India didn't disclose the details about Annual Interest Rate (%) and Compounding Frequency details for this scheme.
Retirement age in this scheme is 60 years.
What happens at Retirement?
Your contribution to this scheme stops.
You will receive the guaranteed monthly pension from the Bank till the end of your life.
Pre-mature closure of the account before the age of 60 years is allowed in the following 2 situations. The benefits will also vary accordingly.
Your death or disease to you
You want to leave the scheme voluntarily
1) Your death or disease to you
Pre-mature closure is allowed in extreme situations like your death or life threatening diseases to you.
In that case, your Nominees or you (as the case may be) will get back entire accumulated amount in your APS account. This includes your contributions, Government co-contributions (if any) and the returns earned on both.
Note that you will not get the account maintenance charges and fees deducted as a part of the APS scheme.
2) You want to leave the scheme voluntarily
If you want to leave the scheme voluntarily before the age of 60 years, you are allowed to do so.
In that case, you will get back your contributions and the returns earned on them.
If you have received co-contributions from the Government, you will not receive the Government's co-contributions and the interest earned on them.
Also you will not get the account maintenance charges and fees deducted as a part of the APS scheme.
What if You Die Before 60 Years of Age?
If you die before 60 years of age, then your spouse can choose one of the following options.
Continue the Account
Close the Account
Let us see the details of each option.
1) Continue the account:
Your spouse can continue to pay contributions into the account in his/her name for the remaining period.
For example, if you die at the age of 50 years, then your spouse can contribute in his/her name for the remaining 10 years.
After that, your spouse will receive the same guaranteed monthly pension till the end of his/her life.
2) Close the account:
Entire accumulated amount (your contributions and returns earned on them) will be given to your spouse and the account will be closed.
You can check the status of your APS account in the following ways.
SMS through Mobile
Important things like account activation, contribution deposits, balance in the account will be sent to your mobile as SMS alerts.
You will receive a physical account statement every year.
If you are moving from one place to another place, there is no need to transfer APS account as the contributions will be debited through auto-debit facility without any problems.
NRI (Non Resident Indians) are eligible to open the account.
If the NRI becomes non-citizen of India, then the account will be closed. The entire contributions and the returns earned on them will be paid to the account holder.
Nomination facility is available and it is compulsory to nominate at the time of opening the account.
If you are married, then your spouse will be the default Nominee.
If you are not married, then you can nominate any other person. But, you should provide your spouse details once you get married.
The scheme recommends to provide Aadhaar Card details of the spouse and nominees.