In order to ensure benefits reach the poor and underprivileged, income taxpayers will not be allowed to join Atal Pension Yojana starting October 1, 2022.
The Atal Pension Yojana is a social security programme for citizens aged 18 to 40 that was introduced in 2015. Depending on their contributions, subscribers receive a guaranteed monthly pension of between Rs 1,000 and Rs 5,000 when they reach 60.
To ensure that the benefits of the Atal Pension Yojana (APY) reach the poor and disadvantaged, the Centre will prohibit income taxpayers from joining the programme as of October 1 of this year. The APY accounts of new subscribers who sign up for the plan on or after October 1 and who are income taxpayers will be closed. According to the Centre, subscribers would get the accumulated pension funds.
Aim behind the move
According to a government official, the view is that the programme should help the poor and underprivileged because it contains a subsidy element or pledge to provide a subsidy. The purpose is to deter people who can afford a pension plan from enrolling in the programme. A low-interest rate regime in the future could increase the government’s burden of gap funding because the scheme provides assured returns.
The plan accepts monthly, quarterly, or semi-annual contributions. The spouse will get the pension in the event of a death, and in the event of both spouses’ deaths, the pension corpus will be repaid to the nominee.
According to Supratim Bandyopadhyay, chairman of the Pension Fund Regulatory and Development Authority (PFRDA), APY is primarily intended to provide pension benefits to the unorganised sector, which includes those who do not seek an exemption from paying income tax. To determine whether income taxpayers use the scheme moving forward, APY customers already have to declare whether they pay income tax. Further checks and balances would be implemented, Bandyopadhyay declared.
According to Bandyopadhyay, fewer than 3 percent of all APY users would be income tax payers. As of August 10, there were roughly 43.9 million gross enrollments for APY. Approximately 70–80 percent of subscribers fall inside the Rs 1,000 pension range.
Bandyopadhyay said that it is a significant commitment on the part of the government to guarantee subscribers a pension, and they want the programme to be targeted at the right section.
If users sign up for the programme by December 31, 2015, the centre had promised to co-contribute up to Rs 1,000 per year when it first announced the programme in 2015. The centre has set up Rs 1,546 crore for the programme as of FY23. The government’s co-contribution, funding assistance to PFRDA for the payment of incentives to aggregators, and advertising initiatives under APY are all included in the planned sum.