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Atal Pension Yojana: A Financial Boon

Created on 29 Dec 2022

Wraps up in 11 Min

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More than 90% of the Indian workforce is engaged in the unorganised job market. This includes freelancing, odd jobs and non-organisational occupations like driving, gardening, personal help, etc. While being a part of the unorganised sector has its benefits of flexibility, the lack of organisational association leads to the loss of certain benefits as well.

The benefit in question is that of pension and pertains to the senior population of the country, which is growing at an alarming rate of 6.8% in 1991 to 9.2% in 2016 and is expected to reach a whopping 14.9% by 2036. The lack of pension paint a bleak picture for these individuals during their twilight years.

To add to this trouble, most individuals engaged in the unorganised job market belong to rural areas with poor education. As a result, they are neither very open to the idea of investing nor do they actively invest. This leaves their financial status in dire straits as they cannot future-proof their funds.

This is where the Pradhan Mantri Shram Yogi Maandhan (PMSYM), and Atal Pension Yojana (APY) come in as boons to these people. PMSYM has a somewhat rigid payout structure of ₹3,000 per month and barriers to entry for people with monthly incomes of more than ₹15,000 per month.

APY, on the other hand, provides flexibility in payout and employee contribution to the fund and also has no stringency on entry, unlike PMSYM. Continue reading this article to explore the various facets of APY.

What is Atal Pension Yojana?

The Indian government formulated a beneficial financial scheme for workers in the unorganized sector. The Atal Pension Yojana, or APY for short, is a pension scheme launched by the Indian government in June 2015 to financially support workers in the unorganized sector, such as drivers, gardeners, personal maids, and many others.

A scheme named Swavalamban Yojana, which existed earlier was replaced by this far more impactful social security pension scheme. The Swavalamban Yojana could not gain much popularity among people. 

The Atal Pension Yojana aims to assist workers in the unorganized sector save money for the future/old age, and it assures positive returns after their retirement. Along with this, the scheme also guarantees that the Central government will contribute around 50% of the total prescribed grant to the worker, which is up to ₹1000 per annum. However, workers can only avail of this if they have joined the scheme before 31st December 2015. Workers can take benefit from the annual contribution of ₹1000 for only five consecutive years, from the financial year 2015-16 to 2019-20. After that, they can no longer avail of the additional benefits of the scheme. 

The Benefits of Atal Pension Yojana

People who contribute to the scheme will be on the receiving end of some significant benefits if they apply to this advantageous pension scheme. Here are some primary benefits of the APY Scheme:

Financially Helpful in Old Age 

As the name suggests, Atal Pension Yojana will primarily benefit workers in old age. It provides a steady source of income for beneficiaries over the age of 60 years. Atal Pension Yojana can be a stable financial support for people after retirement and enables them to meet essential requirements such as food, electricity, water supply, and medications post-retirement.

Acts as a Support to the Unorganized Sector 

The Atal Pension Yojana is designed to alleviate the monetary worries of employees in the unorganized sector, such as gardeners, drivers, delivery boys, maids, and many others. It enables them to become financially independent in their later life stages, especially after retirement. In simpler words, APY Schemes act as a source of financial security for people employed in the unorganised segment or even private sectors without a pension plan. 

Entirely Safe & Secured Scheme 

The Atal Pension Yojana was initiated and executed by the central government of India. The scheme is regulated by a government body PFRDA or Pension Funds Regulatory Authority of India. Hence, applicants can be assured that this scheme is entirely safe and secure under the assurance of the government of India. Under the government's pension security, there is no risk of loss.

The Facility of Electing a Nominee 

In the case of the pension beneficiary's death, their spouse has the right to claim the benefits of the scheme. They can terminate the scheme, withdraw the corpus, or continue the monthly scheme. However, in the case of the death of both the pension beneficiary and their spouse, the scheme allows the selection of a nominee while filling up the application form. Therefore, it is certain that the financial help will go to either the worker's spouse or the nominee that they have selected. The nominee will be entitled to receive the total lump sum corpus amount.

Atal Pension Yojana Eligibility 

All government schemes come with some eligibility requirements that must be fulfilled to qualify for that particular scheme. The same is for Atal Pension Yojana (APY). Here are the eligibility criteria for the APY Scheme: 

  • Applicants must be citizens of India. Documents proving nationality will be required during the application process for the scheme. 
  • Applicant's age must be between 18 to 40 years. People below 18 years or above 40 years are not eligible for the APY Scheme. 
  • Applicants must have an active phone number. 
  • Applicants must have a valid and active bank account linked to their Aadhar card. The active phone number should be linked with the Aadhar number as well. 
  • Applicant must submit the KYC or ‘Know Your Customer' form after filling it up carefully. 
  • Applicant should not have an already active Atal Pension Yojana account. 

In addition, if an individual was a beneficiary under the former Swavalamban Scheme, they directly become eligible and are migrated to the Atal Pension Yojana Scheme.  

The Objectives of the APY Scheme

The fundamental objective of the Atal Pension Scheme is to ensure that no senior citizen of India would have to worry about unexpected diseases, illnesses, or accidents after their retirement in their old age. APY provides a feeling of safety to the senior citizens of our country.

The benefits of the APY scheme are not only limited to marginalized employees of the unorganized sector. Workers employed in the private sector that do not provide any pension after retirement can also avail of this scheme for old age security benefits. 

The scheme is designed to battle the basic financial hardships of our citizens during the critical retirement phase. It encourages them to start saving for the future from an early age. The amount of pensions one can expect through the APY scheme depends upon monthly contributions. 

The beneficiaries of the APY Scheme will be provided with their accumulated corpus as monthly payments. In the case of the beneficiary's death, their spouse will continue to receive the pension. In the case of both individual's death, the nominee will receive the accumulated savings in a lump sum. The workers will be provided with the benefits of the scheme once they reach the age of 60 years. 

Atal Pension Scheme Details and Features

The features of the APY scheme show that it is an excellent scheme as a good retirement plan. Here are the detailed features of the Atal Pension Scheme:

Increase Monthly Contributions 

Many have a concern that the scheme may be rigid and the monthly contributions to this scheme can not be increased. To clarify, the APY scheme is quite flexible. As we have already mentioned, the amount of monthly pension that a beneficiary can receive after the age of 60 depends on their monthly contributions.

The pension payout is directly proportionate to the worker's monthly contribution to the scheme. The monthly contribution can also be reduced by the worker in case they wish to reallocate their finances.

However, note that the corpus amount can be changed only once a year. Due to obvious reasons, frequent changes in the corpus amount are restricted. 

Automatic Debit 

The automatic or voluntary debit feature shows that the Atal Pension Yojana is a very convenient scheme. The workers' active and valid bank accounts will be linked with their pension accounts, and monthly contributions to this scheme will automatically be debited. Therefore, workers are not required to do anything after registering for the scheme, and the government services will take care of the rest. 

However, one must be sure that the bank account is linked with the APY account and has enough financial balance to prevent the automatic debit process from getting hindered. If the linked bank account is short of enough capital, it attracts a penalty.

We will later learn about the possible penalties in the later APY Scheme details. 

Guaranteed Pension

As the scheme is initiated and executed by the central government of India, it is entirely safe and secure. According to a worker's monthly contributions, they can choose different period schemes from ₹1000 to ₹5000. 

Atal Pension Yojana Age Limit

The Atal Pension Yojana only applies to individuals above 18 years and below 40 years. Workers in that age frame can decide to invest in the pension scheme. The age frame shows that the Yojana also encourages college and university students to save from a very young age.

Regarding age, the maximum bar is set at 40 years to enter the APY program. Therefore, people can invest in this scheme for 22 years if they start saving from 18 years of age. Once the investment period is over, the pension scheme benefits will be provided when the workers reach the age of 60. 

Can We Withdraw From Atal Pension Yojana? 

If I am an Atal Pension Yojana beneficiary and have attained the age of 60 years, I am automatically eligible to withdraw the corpus amount. After the scheme's closure with my respective bank, the payouts are made on a monthly basis.

This is the only way to withdraw from the APY scheme to receive its entire added benefits. There are no provisions that allow contributors to exit or close the scheme prematurely, except in the case of death or terminal illness.

This might sound like a drawback of this scheme, but the government utilizes the money at stake by investing and multiplying it to give the contributors benefits later. Therefore, for obvious reasons, the sudden withdrawal of the amount under this Yojana is restricted. Workers can, however, exit or close the scheme before they reach the age of 60. In such a case, only the cumulative monthly contributions and accumulated interest will be refunded.

The beneficiaries of the APY Scheme will be provided with their accumulated corpus as monthly payments. In the case of the beneficiary's death, their spouse will continue to receive the pension. After the beneficiary's death, the spouse can decide whether to continue with the monthly pension scheme or withdraw the entire corpus amount. In the case of both individual's death, the nominee will receive the accumulated savings in a lump sum.

Penalties in Atal Yojana Scheme 

On delayed payments, here are some penalty charges we can face:

  • For monthly contributions of up to ₹100, penalty charges are ₹1. 
  • For monthly contributions of up to ₹101-500, penalty charges are ₹2.
  • For monthly contributions of up to ₹501-1000, penalty charges are ₹5.
  • For monthly contributions of up to ₹1001 and above, penalty charges are ₹10.

On delay of monthly payments for six consecutive months, the scheme account will get frozen. The account will be automatically deactivated after 12 successive monthly payment delays, and the total accumulated saving amount will be refunded to the default account holder along with interest. Once deactivated, workers can again opt to invest in APY, but in that case, they have to open a different account. 

Atal Pension Yojana Tax Benefits

The tax exemptions are available under section 80CCD of the 1961 Income Tax Act. 

Under section 80CCD (1), a 10% of tax exemption is allowed on the total gross annual income within a limit of ₹1,50,000. Under section 80CCD (1B), an additional tax exemption of ₹50,000 will be exercised on the monthly APY scheme contributions. 

We advise discussing the tax implication of the Atal Pension Yojana with a professional for a more suitable application.

How to Apply for Atal Pension Yojana?

All banks in India can initiate the application under the APY Scheme. Below are the following steps on how we can apply for Atal Pension Yojana:

  • Visit the bank where you have a valid and active account. Ensure that the account has enough finances for the monthly Yojana deductions.
  • Carefully fill up the application form with every detail required. 
  • Submit the form to the bank along with two xerox copies of the Aadhaar card. The Aadhaar card acts as proof of age, residence, and citizenship. 
  • Provide the active contact number.

With these quick steps, people can secure their post-retirement horizon by starting to contribute to the APY.

Steps to Download the APY Form

The most important part of opening the Atal Pension Yojana account is filling up the application form. Here are the methods that can be followed:

The form will be provided by the bank officials of your nearest bank, where the applicant has a valid and active account. 

Visit the official website of the Atal Pension Yojana and download and print the application form. The bank websites can also provide the APY forms. 

The Atal Pension Yojana form can be downloaded from the official website of the PFRDA or Pension Fund Regulatory & Development Authority.  

New Government Notification Regarding APY Scheme

According to the current notice issued by the Financial Services Department under the Ministry of Finance, individuals who are or have been part of the income tax authority will not be entitled to apply for the Atal Pension Yojana Scheme. 

The central government will no more allow income tax-payers to join APY Scheme with immediate effect from 1st October 2022. The reason behind the issue of this notification is that the government of India wants this scheme to benefit the underprivileged sections of society. The centre is barring individuals who do not require the benefits of this Yojana. 

The notification issued by the Financial Services Department reads, “Providing that from October 1st, 2022, any Indian citizen who has been or is an active income tax-payer will be not entitled to join the Atal Pension Yojana.”

The Bottom Line 

While most government employees and employees of certain private organisations can reap the benefits of a pension, which allows them to have a secure monetary status after they retire. However, a pension can become a luxury for individuals that are not employed under an organisation or under private organisations that do not provide the benefit.

The Atal Pension Yojana acts as a boon to these individuals by providing them with monetary security during their twilight years.


1. How to Apply for Atal Pension Yojana Online? 

As of yet, applicants can only apply for Atal Pension Yojana through the offline process mentioned above. The application form can be downloaded from the official website of the PFRDA or Pension Funds Regulatory Authority of India. People can visit the nearest bank where they have a valid and active account to apply for the pension scheme.

2. Is it necessary to be an Indian citizen to apply for the Atal Pension Yojana?

Yes. One has to be an Indian citizen to invest in the Atal Pension Yojana scheme or be a beneficiary. During the form fill-up process, two photocopies of the Aadhaar card are required, which is proof of the nominee's residence, age, and nationality.

3. What are the age criteria to apply for APY Scheme?

The minimum age bar for us to apply for the APY Scheme is 18 years, and the maximum is 40 years. Candidates out of this age bracket can not apply for this scheme. Workers must contribute or invest in this scheme for at least 20 years to be eligible for its benefits. Contributors will start receiving the monthly pensions once they reach the age of 60 years.

4. Can we apply for this Yojana without a Nominee?

No. Appointing a nominee is a must while filling up the application form for this Yojana. In the case of the beneficiaries' death, the Nominee is entitled to the scheme benefits.

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