Income taxpayers can't join Atal Pension Yojana from Oct 1: Govt

Social security scheme should reach the poor and underprivileged, says official

The Centre will bar income taxpayers from availing themselves of the Atal Pension Yojana (APY) from October 1 this year to ensure that the scheme’s benefits reach the poor and underprivileged.

Atal Pension Yojana, launched in 2015, is a social security scheme for citizens aged 18 to 40. Subscribers, based on their contributions, get a guaranteed monthly pension of Rs 1,000 to Rs 5,000 per on turning 60.

Subscribers who join the scheme on or after October 1 and are income taxpayers will have their APY accounts closed. The accumulated pension wealth would be given to subscribers, the Centre said.

As the scheme has an element of subsidy or commitment to pay a subsidy, the view is that it should benefit the poor and underprivileged, said a government official. The idea is to discourage those who can afford a pension plan from availing of the scheme. As the government guarantees assured returns through the scheme, a low-interest rate regime in future may increase its burden for gap funding, he said.

Contributions to the scheme can be monthly, quarterly, or half-yearly. In case of death of a person, the spouse will receive the pension and on the death of both, the pension corpus will be returned to the nominee.

APY is primarily meant to cover the unorganised sector with pension benefits, and these are the people who are not looking for an income tax exemption, said Supratim Bandyopadhyay, chairman of the Pension Fund Regulatory and Development Authority (PFRDA). APY subscribers already have to make a declaration if they pay income tax, and this will help in finding out whether income taxpayers use the scheme in future. More checks and balances would be put in place, Bandyopadhyay said.

Less than 3 per cent of all APY subscribers would be income taxpayers, Bandyopadhyay said. There were about 43.9 million gross enrolments for APY as of August 10. About 70-80 per cent of subscribers are in the Rs 1,000 pension bracket.

“The government wants the scheme to be targeted to the right segment, and it is a big commitment from the government to promise assured pension to subscribers, Bandyopadhyay said.

While announcing the scheme in 2015, the centre had said it will co-contribute up to Rs 1,000/year if subscribers avail of the scheme by December 31, 2015. As on FY23, the centre has allocated Rs 1,546 crore for the scheme. The budgeted amount includes the government’s co-contribution, funding support to PFRDA for payment of incentives to aggregators and promotional campaigns under APY.