Friday, December 18, 2015


Recently Central Government launched one more pension scheme called Atal Pension Yojana. So what is the difference between existing National Pension System  (NPS) and Atal Pension Yojana (APY)?


Let us point one by one.

1) Age of joining–

The age for joining the National Pension System  (NPS) is 18-60 years. Whereas for Atal Pension Yojana (APY) the age eligibility is 18-40 years.

2) Who can join?

All Indian citizens can join NPS (whether they are resident or non-resident). Whereas for APY only Resident Indians are allowed to join.

3) Pension Slabs–

In case of NPS, there is no such standard pension slab. However, in APY the pension slabs are fixed like Rs 1,000/-, 2,000/-, 3,000/-, 4,000 and 5,000/- per month.

4) Types of Accounts–

In case of NPS, you have two types of accounts. One is Tier I and Tier II. Whereas, in case of APY there is no such differentiation.

5) Minimum and Maximum Contributions–

In case of NPS

For Tier I

You must contribute a minimum of Rs. 6,000 per annum. The minimum of Rs. 500 per contribution is required. In addition, you must contribute minimum 4 contributions per year. There is no maximum limit.

For Tier II

You have to contribute the minimum of Rs. 1,000 contribution at a time of account opening.

Subsequently, you have to contribute a minimum of Rs. 250 per subsequent contributions. Minimum Balance of Rs. 2,000 be maintained at the end of Financial Year (April-March). There is no maximum limit.

In case of APY

In case of APY, the minimum and range depends on the age. For example, the minimum monthly contribution for 18 years of age person is Rs.42 to get Rs.1,000 monthly pension. At the same time, the minimum monthly contribution for 40 years age person is Rs.291.

There is no upper limit of investment set for both NPS Tier I and Tier II Account. However, in case of APY, the maximum limit for 18 years of age is 210 to get a monthly pension of Rs.5, 000. At the same time, the maximum monthly contribution for 40 years of age person is Rs.1, 454.

6) Premature Withdrawal–

For NPS–

Tier I
  • You can withdraw at age 60, 40% of accumulated amount be used to buy annuities from an IRDA approved insurance company, A phased withdrawal is also allowed, but the lump sum balance should be withdrawn before the age of 70 years.
  • To exit before 60 years age, only 20% of the lump sum to be cash withdrawal, 80% to be used to buy annuities from an IRDA approved insurance company.
  • On death before the age of 60, the nominee receives a lump sum.
Tier II

There is no restriction and you can withdraw it at any point of time.
For APY–
  • Once you attain the age of 60 years, then you have no option but to utilize 100% of the accumulated amount for a pension. No partial withdrawal is permitted.
  • You cannot withdraw in APY. Withdrawal is available only in case death or terminal diseases.
7) Choice of investment–

In case of NPS, you have primarily two choices. One is Auto Choice where the asset allocation among equity, Corporate Bonds, and Government Bonds are adjusted automatically based on age of a subscriber. Another is Active Choice, where you select your asset allocation (subject to the maximum of 50% in equity). In addition, you have a freedom to choose fund managers to manage your money.

In case of APY, there are no such options.

8) Tax Benefit–

While Investing–
The tax benefit in NPS will be available only in case of Tier I account, but not for Tier II account.

Employer contribution to the NPS on behalf of an employee will get a deduction from his income (i.e. employer’s income) an amount equivalent to the amount contributed or 10% of BASIC SALARY + DA of the employee, whichever is less. (Section 36 (1) (iv a) of the Income Tax Act 1961).

Employer’s contribution to NPS on behalf of the employee is treated as perquisite in the hands of the employees. However, it is deductible u/s 80CCD (2) of the IT Act, 1961 to the extent of 10% of basic salary. This deduction is over and above the limit of Rs.1.5 lac u/s 80 CCD (1). This will lessen the tax burden of the employee to the extent of amount deductible u/s80CCD (2) of the IT Act, 1961.
Contribution by an individual employee is eligible for a deduction from Income under Section 80CCD (1) of the IT Act 1961 up to Rs 1.5 Lakhs. However, investments under Section 80C Section 80CCC and 80CCD(1) should not exceed Rs.1.5 lakhs per assessment year to claim the deduction.

An additional tax benefit of Rs.50,000/- under section 80CCD (1B) per year (applicable from FY 2015-16/AY 2016-17) for NPS investments.

There are no such tax benefits of investing in APY.
While receiving pension–

Both NPS and APY pension is treated as taxable income under the head of a salary.

9) Where to open an Account?

In case of NPS, you have to open the account by visiting the nearest Point of Presence (POP) branch to open the account. This account could also be opened online through CAMS online, India Post etc.

In case of APY, you have to approach the bank/Post Office where your savings bank account is held.

10) Nomination facility-

In case of NPS, the nomination is not mandatory. However, you can nominate a maximum of 3 members. The total sum sharing of all these nominees must be equal to 100%.
In case of APY, the nomination is mandatory. You have to provide nominee details while opening the account.

11) How much return you can expect?

In case of NPS, returns are not guaranteed. It depends on the performance of the fund. Whereas, in case of APY, returns not disclosed. But set the fixed monthly pension.

12) Government contribution–

In case of NPS, the Central Government and State Government employee’s contribution are fixed at 10% of the Basic and Dearness Allowance (DA) per month which is matched by an employer contribution of the same amount. For the rest of the people, there is no Government contribution.
In APY, the Government will also contribute 50% of the total contribution or Rs. 1,000/- per annum, whichever is lower, to the eligible APY account holders who join the scheme during the period 1st June, 2015 to 31st December, 2015. The Government contribution will be for 5 years from FY 2015-16 to 2019-20. This contribution to APY will not be applicable to those members who are-
  • Income Tax Payers.
  • Employees’ Provident Fund & Miscellaneous Provision Act, 1952.
  • The Coal Mines Provident Fund and Miscellaneous Provision Act, 1948.
  • Assam Tea PlantationProvident Fund and Miscellaneous Provision, 1955.
  • Seamens’ Provident Fund Act, 1966.
  • Jammu Kashmir Employees’ Provident Fund & Miscellaneous Provision Act, 1961.
  • Any other statutory social security scheme.
13) Who manages?

NPS is managed by PFRDA. The APY scheme is administered by the PFRDA/Government.
14) Permanent Account Number–
In case of NPS, you will get the unique Permanent Retirement Number (PRAN). By quoting this PRAN, you can operate NPS sitting across India. There is no such facility in APY.

15) How many accounts, one can open?

For both NPS and APY an individual can open only ONE account.

Courtesy :

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