APY Penalties: 10 facts you must know before investing

For someone looking for a fixed pension during their retirement, the guaranteed pension scheme of the Government of India — Atal Pension Yojana (APY) — can be worth a look. The APY pension scheme is administered by the Pension Fund Regulatory and Development Authority (PFRDA) and is available to only those who are between 18 and 40 years of age. The other criteria to invest in APY is that one needs to have a savings account in a bank or a post office. APY pension scheme is a deferred pension scheme, i.e. one needs to keep contributing regularly till age 60 and, thereafter, a fixed amount of monthly pension will begin.

Here are a few lesser-known APY pension scheme details to know before you invest:

1. Frequency of contribution

In the initial years, the only option to pay APY contributions was on a monthly basis. However, the individual subscribers also have an option to make the contribution on a quarterly or half-yearly basis in addition to a monthly basis to get APY pension from age 60.

2. Guaranteed pension

The pension amount is a fixed amount that the subscriber is assured to receive from age of 60. However, the actual returns generated by the government may vary. As per the rules, if the accumulated corpus based on contributions earns a lower than estimated return on investment and is inadequate to provide the minimum guaranteed pension, the Central Government would fund such inadequacy. Alternatively, if the actual returns during the accumulation phase are higher than the assumed returns for minimum guaranteed pension, such excess will be passed on to the subscriber.

3. Tax benefit in APY

The amount of investment into APY qualifies for deduction under section 80CCD (1) of the Income-tax Act, 1961 as APY has been notified a pension scheme by the government. The pension that one gets, however, forms a part of one’s total income and is taxed as per one’s tax rate.

4. APY chart – Contributions and corpus

In APY, there is a minimum guaranteed pension of Rs.1000 per month or Rs. 2000 per month or Rs. 3000 per month or Rs. 4000 per month or Rs. 5000 per month. As per the APY chart, these are the APY scheme benefits:
As per the APY calculator, for a minimum guaranteed pension of Rs. 1000 per month, the monthly contribution will be range between Rs 42 and Rs 264 for entry age of 18 to 39. The return of corpus to the nominees will be Rs 1.7 lakh, irrespective of the entry age.
Simiarly, the APY calculator shows that for a minimum guaranteed pension of Rs. 2000 per month, the monthly contribution will be range between Rs 84 and Rs 528 for entry age of 18 to 39. The return of corpus to the nominees will be Rs 3.4 lakh, irrespective of the entry age.
For a minimum guaranteed pension of Rs. 3000 per month, the monthly contribution will be range between Rs 126 and Rs 792 for entry age of 18 to 39. The return of corpus to the nominees will be Rs 5.1 lakh, irrespective of the entry age.
For a minimum guaranteed pension of Rs. 4000 per month, the monthly contribution will be range between Rs 168 and Rs 1054 for entry age of 18 to 39. The return of corpus to the nominees will be Rs 6.8 lakh, irrespective of the entry age.
For a minimum guaranteed pension of Rs. 5000 per month, the monthly contribution will be range between Rs 210 and Rs 1318 for entry age of 18 to 39. The return of corpus to the nominees will be Rs 8.5 lakh, irrespective of the entry age.
The NPS Trust website has the APY calculator to help one calculate the tentative pension and lump Sum amount to expect on maturity or 60 years of age based on regular contributions.

5. Discontinuation

In case one stops making a contribution towards APY, the discontinuation of payment of contribution will not deactivate the APY account immediately. As per the rules, the account will not be deactivated and closed till the account balance with self-contributions minus the Government co-contributions, if there is any, becomes zero due to deduction of account maintenance charges and fees.

6. Penalty

If one makes a delayed payment towards APY, there is a penalty levied for it. The penalty on delayed payment is Rs. 1 per month for the contribution of Rs 100, or part thereof, for each delayed monthly payment instead of different slabs in the past.

7. Renew APY account

In case of default in payment of contribution, one needs to regularise the APY account by paying the overdue amount along with the penalty amount. Once the account is regularised, the pension becomes guaranteed under the scheme.

8. Premature exit

Earlier, any premature exit from the APY scheme before the age of 60 was not allowed except in the event of the death of the subscriber or terminal disease. Subsequently, the rules were changed and one can exit APY voluntarily, subject to the following conditions:
  • The contributions made by the subscriber to APY, along with the net actual interest earned on the contributions will be made after deducting the account maintenance charges, and
  • If there is any co-contribution made by the government, it will not be returned along with interts earned on the contributions.

9. Government’s co-contribution

All those who had joined the APY before 31st March 2016 and are not members of any statutory social security scheme and who are not income taxpayers get a co-contribution from government into their APY account. The central government co-contributes 50 per cent of the total contribution made by the subscriber or Rs. 1000 per annum, whichever is lower for a period of 5 years, i.e., from Financial Year 2015-16 to 2019-20,

10. Premature death

In case of premature death of APY subscriber i.e. death before 60 years of age, the spouse of the subscriber has the option to continue contributing to APY account of the subscriber, for the remaining vesting period, till the original subscriber would have attained the age 60 years. In case of death of both subscriber and spouse, the entire pension corpus would be returned to the nominee.
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Atal Pension Yojana (APY) for Social Security in India


Financial inclusion, social security, and low-cost benefits for the masses have been high on the NDA government’s agenda. Ever since the NaMo government’s ascent to the centre, PM Modi, FM Jaitley, and the Cabinet have worked relentlessly towards promulgation of new schemes that make financial security for the common man. The first step towards achievement of social security was the rollout of the Pradhan Mantri Jan Dhan Yojana (PMJDY). With Phase I being declared a major success and 1.8 crore accounts having been opened across the country, the government has flagged off three new schemes on 9 May 2015 – two insurance schemes (Pradhan Mantri Jeevan Jyoti Bima Yojana, and Pradhan Mantri Suraksha Bima Yojana), and a pension scheme (Atal Pension Yojana). This is called Phase II of the PMJDY, since it was important to get people into mainstream banking before any benefits can be extended to them.


Atal Pension Yojana

“As our young population ages, it is also going to be pension-less. Encouraged by the success of the Pradhan Mantri Jan Dhan Yojana, I propose to work towards creating a universal social security system for all Indians that will ensure that no Indian citizen will have to worry about illness, accidents or penury in old age”, said Finance Minister Jaitley in his February 2015 Budget speech. In keeping with this ideal, a National Pension Scheme, the Atal Pension Yojana will be effective from 1 June 2015. The scheme intends to bring pension benefits to allow people of the unorganised sector to enjoy social security with minimum contribution per month.
People who work in the private sector or employed in occupations that do not give them the benefit of pension can apply for the scheme. They can opt for a fixed pension of INR 1,000 or 2,000 or 3,000 or 4,000 or 5,000 on attaining the age of 60. The amount of contribution and the individual’s age will determine the pension. Upon the contributor’s death, the spouse of the contributor can claim the pension and after the spouse’s death the nominee will be returned the corpus accrued.
The amount collected under the scheme is to be managed by Pension Funds as per the investment pattern specified by the Government. Individual applicants will have no choice of pension funds or investment allocation.

Benefits of Atal Pension Yojana

The Atal Pension Scheme will bring security to ageing Indians while at the same time promote a culture of savings and investment among the lower and lower middle class sections of society. One of the greatest benefits of the scheme may be enjoyed by the poorer sections of society. The government of India has decided to contribute 50 percent of the user’s contribution or INR 1,000 a year (whichever is lower) for a period of five years. This contribution will, however, be enjoyed only by those who are not income tax payers and those who join the scheme before 31 December 2015.

Who is Eligible?

The Atal Pension Yojana (APY)  is open to all Indians between the age of 18 and 40. This allows an individual to contribute for at least 20 years before reaping the benefits of the scheme. Any bank account holder who is not a member of any statutory social security scheme can avail of the scheme.
All existing members of the government’s ‘Swavalamban Yojana NPS Lite’ will automatically be migrated to the Atal Pension Yojana. It will now replace the Swavalamban scheme, which did not gain much popularity across the country.

How to Enroll?

To sign up for the Atal Pension Yojana, an account holder must fill in an authorisation form and submit it to his/her bank. The form will require complete details including account number, spouse and nominee details, and authorisation for auto debit of contribution amount. Account holders signing up for the scheme need to ensure that sufficient balance is maintained in the account every month, failing to do so will attract a monthly fine of –
  • INR 1 for monthly contribution up to INR 100
  • INR 2 for monthly contribution between INR 101 and INR 500
  • INR 5 for monthly contribution between INR 501 and INR 1,000
  • INR 10 for monthly contribution beyond INR 1,001
If no payment is made towards the scheme
  • for six months, the holder’s account will be frozen
  • for 12 months, the holder’s account will be deactivated
  • for 24 months, the holder’s account will be closed
For those who does not have a bank account: A person needs to open a bank account first by submitting the KYC document and Aadhar card. He/she is also required to submit the APY proposal form.
Exiting the scheme: Under ordinary circumstances, an account holder who has enrolled for the Atal Pension Yojana will not be able to exit the scheme before the age of 60. Exiting the scheme is only possible in special circumstance such as in the event of the death of the beneficiary.
Application Form
The application form can be downloaded from http://www.jansuraksha.gov.in/FORMS-APY.aspx. The forms are available in different languages – English, Hindi, Gujarati, Bangla, Kannada, Odia, Marathi, Telugu and Tamil.
Indicative Contribution for Various Pension Options (in INR)
Entry Age
Years of Contribution
Monthly Pension INR 1000
Monthly Pension INR 2000
Monthly Pension INR 3000
Monthly Pension INR 4000
Monthly Pension INR 5000
18
42
42
84
126
168
210
19
41
46
92
138
183
228
20
40
50
100
150
198
248
21
39
54
108
162
215
269
22
38
59
117
177
234
292
23
37
64
127
192
254
318
24
36
70
139
208
277
346
25
35
76
151
226
301
376
26
34
82
164
246
327
409
27
33
90
178
268
356
446
28
32
97
194
292
388
485
29
31
106
212
318
423
529
30
30
116
231
347
462
577
31
29
126
252
379
504
630
32
28
138
276
414
551
689
33
27
151
302
453
602
752
34
26
165
330
495
659
824
35
25
181
362
543
722
902
36
24
198
396
594
792
990
37
23
218
436
654
870
1,087
38
22
240
480
720
957
1,196
39
21
264
528
792
1,054
1,318
40
20
291
582
873
1,164
1,454
*Data from Atal Pension Yojna brochure

Launch Across the Country

The Atal Pension Scheme and the other insurance schemes were launched on 9 May, simultaneously by Union and Chief Ministers. Indian Prime Minister Narendra Modi launched the scheme from Kolkata. Launch functions were held at about 116 locations across the country including state capitals and a number of district headquarters. Post its launch, 7,35,857 people have already registered for the scheme as on 2 September 2015.

Recent Developments

Government will extend the benefit of the APY via Post Offices all over the country so as to bring more people under its ambit. The implementation of the scheme through post offices is expected to be more helpful for the people in rural areas.



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