The Centre recently announced a major change in the Atal Pension Yojana which states that income taxpayers will not remain eligible for the scheme from October 1, 2022. The latest modification mandates that if a subscriber, who joined on or after October 1, 2022, 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.
Now, the question arises is whether an existing APY investor can continue to claim a tax deduction on the investments made in the scheme or not.
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Tax deduction on Atal Pension Yojana
The APY scheme only seeks to restrict the entry of income taxpayers from October 1, 2022. Therefore, APY subscribers who had joined the scheme before October 1, 2022, can continue to invest and avail the tax benefits. They can claim deduction under Section 80CCD(1) of the Income-tax Act, 1961, for the contributions made by them, explained S Vasudevan, Executive Partner, Lakshmikumaran & Sridharan Attorneys.
Suresh Surana, founder of tax consulting group RSM India, told Economic times that the notification dated August 10, 2022, does not provide clarity regarding the income-tax implications for the contribution made to the APY scheme either before October 1, 2022, or after.”
He added investors contributing to APY before October 1, 2022, would be eligible for deduction under Section 80CCD(1).
The government-backed scheme offers a guaranteed pension from the age of 60. The minimum and maximum pension an individual can get is Rs 1,000 per month (Rs 12,000 annually) and Rs 5,000 per month (Rs 60,000 annually), respectively.
The income-tax benefit on the scheme was notified on February 19, 2016. It is worth stating here that the maximum deductions under Section 80 CCD (1) and Section 80C are limited to Rs 1.5 lakh in a financial year. So if you have exhausted the limit under Section 80C by investing in Employees’ Provident Fund, Public Provident Fund, ELSS mutual fund, life insurance premium or others, you will not be able to claim a deduction for the APY investment.
Atal Pension Yojana details, eligibility
Seven years ago on June 1, 2015, the central government had rolled out the Atal Pension Yojana to provide social security to all Indians. The minimum age for joining the scheme is 18 years and the maximum is 40. A subscriber will receive a fixed pension from the age of 60.
Under the pension scheme, the subscriber can opt for pension amounts ranging from Rs 1,000 per month to Rs 5,000 per month.
Contribution to the scheme can be made on a monthly, quarterly or half-yearly basis, with the amount depending on the amount of pension opted for and the age of the individual. It is better to start early as the sooner an individual starts investing in the scheme, the lower their contribution amount would be.
