Atal Pension Yojana or APY is the Government Of India’s flagship social benefit pension program. Earlier when it was launched, there were no tax benefits. However, now APY is treated like NPS for tax benefits. Let us see the APY or Atal Pension Yojana Tax Benefits under Sec.80CCD(1) and Sec.80CCD(1B).
Before jumping into understanding the APY or Atal Pension Yojana Tax Benefits under various IT Sections, first, let us understand the features of Atal Pension Yojana or APY.
# Features and Benefits of Atal pension Yojana
# Any citizen of India whose age is between 18 Yrs to 40 Yrs can join this scheme.
# He should have a savings account or must open the savings account.
# One person can open only one account.
# You can open the APY scheme by visiting the bank where your savings account is.
# You will start to receive the pension when you turn 60 years of age.
# If the subscriber dies before the age of 60 years, his/her spouse would be given an option to continue contributing as usual, for the remaining period, till the original subscriber would have attained the age of 60 years.
# If the spouse of the deceased not interested to continue the APY account, then he or she can close the account there itself and can claim the amount.
# In case of death of subscriber, the same pension would be available to the spouse and on the death of both of them (subscriber and spouse), the pension wealth accumulated till age 60 of the subscriber would be returned to the nominee.
# You can change the mode (monthly/quarterly/half yearly) of auto debit facility once in a year during the month of April.
# You can opt to decrease or increase pension amount during the course of accumulation phase, once a year.
# It is mandatory to provide nominee details in APY account. If the subscriber is married, the spouse will be the default nominee. Unmarried subscribers can nominate any other person as nominee & they have to provide spouse details after marriage.
# Exit before age 60 would be permitted only in exceptional circumstances, i.e., in the event of the death of the beneficiary or terminal disease.
# There is guaranteed minimum monthly pension for the subscribers ranging between Rs. 1000 and Rs. 5000 per month.
# Below table will show the contribution and the pension you receive from APY.
To know more about Atal Pension Yojana or APY, refer my earlier post “Atal Pension Yojna (APY)-New Pension Scheme details and benefits“.
Atal Pension Yojana Tax Benefits
Let us now discuss the APY or Atal Pension Yojana Tax Benefits during the time of investment and also at the time of retirement. I summarized the same in below image for a glance.
# Atal Pension Yojana Tax Benefits – During Investment
Earlier there was no clarity about the APY or Atal Pension Yojana Tax Benefits. However, recently CBDT clarified the doubt and now Atal Pension Yojana enjoys the tax benefits exactly like NPS Tax Benefits. There are two sub-sections under Sec.80CCD. I explained the same in below image.
1) APY or Atal Pension Yojana Tax Benefits under Sec.80CCD(1)
- The maximum benefit available is Rs.1.5 lakh (including Sec.80C limit).
- An individual’s maximum 20% of annual income (Earlier it was 10% but after Budget 2017, it increased to 20%) contribution will be eligible for deduction.
- As I said above, this section will form the part of Sec.80C limit.
2) APY or Atal Pension Yojana Tax Benefits under Sec.80CCD(1B)
- This is the additional tax benefit of up to Rs.50,000 eligible for income tax deduction and was introduced in the Budget 2015
- Introduced in Budget 2015. One can avail the benefit of this Sect.80CCD (1B) from FY 2015-16.
- Both self-employed and employees are eligible for availing this deduction.
- This is over and above Sec.80CCD (1).
# Atal Pension Yojana Tax Benefits – During Retirement
The pension you receive during retirement is considered as salary income and taxed as per your applicable tax slab at that time.