Atal Pension Yojana rule change: Big setback for taxpayers - know how it will impact your savings

Atal Pension Yojana rule change: The government has introduced a major change in the Atal Pension Yojana (APY). According to a gazette notification issued by the Ministry of Finance, a person paying income tax will not be eligible to join the scheme from October 1. 

The Atal Pension Yojana is considered to be a dominant player in the social security space in the country. The scheme was introduced by the Modi government in 2015 and mainly focuses on the unorganised sector people.

“Provided that from 1st October, 2022, any citizen who is or has been an income-tax payer, shall not be eligible to join APY," the notification said. "For the purpose of this clause, the expression income-tax payer shall mean a person who is liable to pay income tax in accordance with the Income Tax Act, 1961, as amended from time to time."

In case a subscriber, who joined on or after October 1, is subsequently found to have been an income-tax payer on or before the date of application, the APY account shall be closed and the accumulated pension wealth till date would be given to the subscriber, the Ministry of Finance said.

The APY scheme mainly provides financial coverage to those who are uncertain about their income and financial social welfare after retirement. The APY, considered to be a 'government guaranteed scheme', provides tax deduction benefits as well. Those contributing to the scheme can avail of additional tax benefits under Sections 80 CCC and 80CCD.

One must be at least 18 years at the time of enrollment in the scheme. The maximum age to apply for the scheme is 40 years.

Under the Atal Pension Yojana, if an 18-year-old joins the scheme and starts depositing Rs 210 every month for the next 42 years (till he turns 60), he will be eligible for a monthly pension of Rs 5,000 (fixed).

The return in APY is pre-defined at the time of subscription.