Atal Pension Yojana (APY) ends for taxpayers from today: What’s in store for them now?

Pension is a source of monthly income for people in their elderly years, which makes it one of the most important personal finance decisions that a salaried person should make. The Government of India’s Atal Pension Yojana (APY), a pension program, is targeted at employees in the unorganized sector. Based on the contribution made by the subscribers towards their selected pension amount, the subscriber will be eligible to receive a minimum guaranteed pension per month after reaching the age of 60 years. As per the rules of the Finance Ministry, starting October 1, income tax payers will not be allowed to enroll in the government’s Atal Pension Yojana (APY). As of today, interested taxpayers will have to sign up for APY by today; But, if they fail to do so, what are the alternative investment options available to them from tomorrow? let’s find out.

Aditi Singh, Head of Strategy, Satin Creditcare Network Ltd. said, “Atal Pension Yojana was launched on 1st June 2015 by the Government of India to provide social security to the workers. This pension scheme was mainly for the unorganized sector. However, recently it was announced that any person who is or has been a taxpayer will not be eligible for this pension scheme. One of the major reasons for this is to direct the money towards the welfare of the economically weaker people. Any person who has been and has been a taxpayer has to close his account. From October 1, 2022, the government will close the accounts of those people with Atal Pension Yojana who have been taxpayers and the amount will be returned to the subscriber.

He further added that “However, these taxpayers need not worry as there are many other places where they can invest their funds. They can avail NPS (National Pension Scheme) as well as PPF (Public Provident Fund) benefits. Can avail. Under NPS, one can avail tax benefits of up to Rs. 50,000 over 80C investment, which is Rs. 1.5 lakh. PPF comes with less risk than NPS. PPF fixed interest rate per annum While the NPS return rate is subject to market conditions and may vary accordingly every year. Funds held in PPF are tax-deductible under 80C, up to Rs.1.5 lakh. Also, the amount on it The interest is completely tax-free and the maturity amount is tax-free as well. The interest rate for PPF ranges from 7% to 8% and for NPS, from 9% to 12%. Taxpayers are eligible for good tax-saving ULIPs (Unit Linked) insurance plan), which will help them to get insurance while investing as well as saving on taxes.

Zubin Dabbu, Marketing Head, Epsilon Money Mart said, “As per a gazette notification issued by the Ministry of Finance, any citizen who is or has been an income tax payer as per the Income Tax Act shall not be eligible to join Atal Pension. Scheme or APY from 2022. APY is a scheme focused on workers in the unorganized sector. The scheme provides a guaranteed minimum pension per month at the age of 60. However, the minimum guaranteed pension depends on the contribution of the subscribers. APY is mainly It is targeted for the unorganized sector, whose income may not be stable and/or whose jobs are such that they are not eligible for pension schemes – which are mandatory in the organized sector. joins or has joined earlier and is found to be a taxpayer – as per the guidelines – “APY account will be closed and pension amount accumulated till now will be given to the subscriber.”

He further added that “For a taxpayer – there are several options that can be availed – especially to reduce the taxable income under section 80C (deduction up to Rs 1,50,000 per annum). PPF , LIC Premium, NSC or National Savings Certificate are some of the options that investors can avail to avail this deduction. An option investors should seriously consider is Equity Linked Savings Scheme or ELSS Fund. 3 Years Lock-in With the duration, ELSS funds not only help in saving tax but also help investors to build wealth through investments in equity funds.With an impressive average return of 15.6 per cent over a period of 3 years, ELSS funds are a great choice for investors. It proves to be an attractive option to save tax and build wealth at the same time.

What are the benefits of Atal Pension Yojana?

After reaching the age of 60 years, APY will start minimum guaranteed pension of Rs. 1,000, Rs. 2,000, Rs. 3,000, Rs. 4,000, or Rs. 5,000 per month, depending on the contribution made by the subscribers towards their selected pension amount. Contribution can be made automatically from savings bank account on monthly, quarterly or half-yearly basis.

“The benefit of minimum pension under the Atal Pension Yojana shall be guaranteed by the Government in the sense that if the actual achievable return on pension contribution is less than the estimated return for the minimum guaranteed pension, such reduction in the period of contribution shall be funded by the Government. On the other hand, if the actual return on pension contribution is more than the estimated return for minimum guaranteed pension, then over the period of contribution, the benefit of such enhanced scheme will be passed on to the subscribers,” states PFRDA.

Qualification required to join APY

Any Indian citizen can enroll in the APY initiative, irrespective of his/her employment status in the Government/Public Sector, although they must be between 18 to 40 years of age and have a savings bank account or a post office savings bank account needed. Aadhaar can also be submitted at the time of enrollment as the APY program has been notified for the same, however enrollment in the APY account and furnishing of spouse details is mandatory.

“As per the provisions of the Act, any person who is eligible to receive such benefits under APY, shall be required to produce proof of having an Aadhaar number or undergo enrollment under Aadhaar authentication. Therefore, it is desirable to provide Aadhaar number for proper identification of the customer,” PFRDA says.

Tax benefits available under APY

“The contribution made by an individual under Atal Pension Yojana is eligible for deduction under section 80CCD of the Income Tax Act, 1961. The maximum deduction under section 80CCD(1) of the Income Tax Act, 1961 is 10% of the gross total income. Subject to maximum deduction of Rs. 1,50,000 per annum specified under section 80CCE of the Income Tax Act. Additional contribution of Rs. 50,000 per annum is eligible for an additional deduction of Rs. 50,000 per annum under section 80CCD(1B) of the Income Tax Act, 1961. These deductions are subject to fulfillment of the conditions mentioned in the Income Tax Act, 1961. Tax laws are subject to amendment from time to time. This is not a legal advice or tax advice and users are advised to consult their tax advisors before taking any decision or taking any action,” Kotak Mahindra Bank mentioned on its website.

Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.

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