Looking To Invest In Atal Pension Scheme? Find Out How Much You Need To Pay

Atal Pension Yojana (APY) is a pension scheme focused on the unorganised sector. Atal Pension Scheme or APY is administered by pension fund regulator PFRDA. Individuals between 18 and 40 years of age can invest in the Atal pension scheme to earn a fixed pension of Rs 1,000 per month, Rs 2,000 per month, Rs 3,000 per month, Rs 4,000 per month or Rs 5,000 per month, according to PFRDA's website - pfrda.org.in. The government is considering a proposal to raise the pension limit under Atal Pension Yojana (APY) to up to Rs 10,000 per month, news agency Press Trust of India had reported last month citing a top government official. Subscribing to the Atal pension scheme at an early age minimises the contribution required to reach the desired minimum monthly pension, maximising the pension benefit, say experts. (Also read: How to invest in Atal Pension Yojana)

Here are five things you should know if you are looking to invest in Atal pension (APY) scheme:

1. Age requirement: The minimum age to invest in Atal Pension Yojana is 18 years and the maximum age is 40 years. The pension is payable at the age of 60 years.

2. Minimum amount required for investment: One can invest in the Atal pension scheme through three modes of payment: monthly, quarterly and half-yearly. That means the pension scheme requires the investor to make a minimum of two contributions every year. For instance, an investor subscribing for the Atal scheme at the age of 18 years is required to pay Rs 42 per month to reach a pension goal of Rs. 1,000 per month.

3. Pension benefit: The Atal pension scheme works on the basis of pre-defined contribution slabs which enable an investor to reach his or her fixed pension goal of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 and Rs 5,000. The earlier one starts, the lower is the monthly contribution required to reach the desired pension goal, say experts. "One should look for investing in APY scheme if the individual doesn't have a significant or larger corpus to invest," says Dinesh Rohira, founder and CEO, 5nance.com.

For instance, a subscriber at the age of 18 will contribute Rs 210 per month for 42 years to earn a pension of Rs 5,000 per month after maturity of the scheme. That means a total investment of Rs. 1,05,840. That is lower than investment worth Rs 3,48,960 required by an individual who enters the scheme at 40 years of age for the same pension slab. The 40-year-old investor is required to contribute Rs. 1,454 per month for a period of 20 years for the pension goal of Rs 5,000 per month. (Read more)

(Using a chart, PFRDA explains the contribution levels vis-a-vis minimum fixed monthly pension)

4. Income tax benefit: Contributions paid in Atal Pension Yojana can be claimed for income tax deduction up to Rs. 50,000 under Section 80CCD (1B) of the Income Tax Act, over and above the Rs. 1.5 lakh per financial year allowed under Section 80C.

5. How to subscribe/exit: Opening an Atal Pension Yojana account requires the applicant to hold a savings account either with a bank or a post office. Atal pension scheme subscribers are allowed premature exit before the age of 60 years "only in exceptional circumstances, i.e., in the event of the death/ terminal disease", according to the PFRDA website. (Read more)