Atal Pension Yojana is a government-backed pension scheme launched in June 2015, aimed at providing a guaranteed minimum pension to workers in the unorganised sector who do not have access to employer-run pension plans like EPF or NPS.
How it works
You choose a guaranteed monthly pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 or Rs 5,000, payable from age 60 until death. The monthly contribution depends on your age at entry and the pension amount you choose.
| Entry age | Monthly contribution for Rs 5,000 pension |
|---|---|
| 18 years | Rs 210 |
| 25 years | Rs 376 |
| 30 years | Rs 577 |
| 35 years | Rs 902 |
| 40 years | Rs 1,454 |
The younger you start, the less you pay each month. Contributions are auto-debited from your bank account monthly, quarterly or half-yearly.
Eligibility
- Indian citizen between 18 and 40 years of age.
- Must have a savings bank account and a linked mobile number.
- Not an income tax payer (from October 2022, existing income tax payers at the time of application are ineligible to join).
- Not already a member of any statutory social security scheme.
The pension guarantee
The pension amount is guaranteed by the Government of India. If the accumulated corpus generates returns higher than the guaranteed pension, the subscriber gets a higher pension. If returns fall short, the government makes up the difference. This guarantee is what distinguishes APY from market-linked products like NPS.
What happens after 60
- The subscriber receives the chosen pension amount every month.
- On the subscriber's death, the spouse receives the same pension for life.
- On the death of both, the nominee receives the accumulated corpus.
Premature exit
Voluntary exit before 60 is generally not permitted except in cases of terminal illness, death or specific government-notified conditions. The corpus at exit will be the accumulated contribution plus returns, not the guaranteed pension amount.
Tax benefit
Contributions to APY qualify for deduction under Section 80CCD(1B), which provides an additional Rs 50,000 deduction over and above the Rs 1.5 lakh limit of Section 80C. This benefit is available under the old tax regime.
Where APY fits
APY is designed for those without formal pension coverage: daily-wage workers, small shopkeepers, domestic help and others in the unorganised sector. The contribution amounts are deliberately kept low and the pension is guaranteed.
For salaried employees already covered by EPF and NPS, APY's maximum pension of Rs 5,000 per month is too small to be a primary retirement plan. It can serve as a supplementary safety net, but NPS with its higher contribution limits and market-linked returns is the more impactful tool for building retirement wealth.
Compare pension options using our NPS calculator.