Know the benefits of Atal Pension Yojana and National Pension Scheme. Know, what is the difference between APY and NPS, and know the what is better for investment?
Whenever it comes to pension, the first thing that comes to mind is guaranteed income after retirement.
There are many types of pension schemes available in the market, offered by the government as well as many private companies, out of which choosing one is a difficult task.
Two pension schemes are very much preferred in terms of retirement planning – Atal Pension Yojana (APY) and National Pension Scheme (NPS). You can choose any one scheme according to your need.
What is the difference between APY and NPS.
What is Atal Pension Yojana – APY:
Atal Pension Yojana is a guaranteed pension scheme from the Government of India, which is being operated by PFRDA. This scheme is mainly for the employees of the unorganized sector.
The Government of India provides guarantees. To take advantage of this pension scheme, your age should be at least 18 and maximum 40 years.
Under this scheme, investment will have to be made for at least 20 years. Under Atal Pension Yojana, you cannot withdraw the money invested before maturity. Under Atal Pension Yojana, no investment option is given to the investors.
What is National Pension Scheme – NPS:
The National Pension Scheme (NPS) was launched in January 2004 for government employees. It was opened to all people in 2009. In NPS, any person can invest a fixed amount regularly.
NPS works like a savings account, from where you can withdraw money as per your requirement. If you want to invest in National Pension Scheme, then it is necessary that you should be above 18 years of age the maximum age limit for this is 55.
In NPS, investors are given the option, where they can choose to invest according to their need or desire.
Types of accounts
There are two types of accounts in National Pension Scheme: Tier 1 and Tier 2. Funds cannot be withdrawn from Tier 1 till the age of 60 years. Tier II NPS account works like a savings account, from where the customer can withdraw money as per his requirement. On the other hand, there is only one type of account in Atal Pension Yojana.
Benefits of Atal Pension Yojana and National Pension Scheme
Who can take the plan?
Any residents of India can invest in Atal Pension Yojana. On the other hand any investors, who are citizens of India, can invest money in National Pension Scheme. Apart from this, NRIs can also invest in this scheme.
Talking about the guarantee of pension, by investing in Atal Pension Yojana, you get a guaranteed pension after retirement. On the other hand, there is no guarantee of pension after retirement in National Pension Scheme. Actually, NPS is linked to the capital market. Therefore, there is no guarantee of profit in this.
Sub section 80CCD (1) of section 80CCD provides tax exemption on deposits in this pension scheme.
As per the existing income tax provisions, section 80CCD provides the benefit of tax deduction on National Pension Scheme account.
Self-employed person get up to 20 percent of their total income in the pension account, subject to a maximum of Rs 1.5 lakh.
Salaried employees can get exemption up to 10 percent of their salary. Apart from this, there is also another sub-section 80CCD (1B), under which both the salaried employee and the self-employed person can take advantage of additional tax exemption by depositing in the NPS account on their behalf.
It will be up to Rs 50000. On the other hand, talking about Atal Pension Yojana, investors do not get any kind of tax benefit in it.
Withdraw money before maturity
Under National Pension Scheme, Tier II NPS account works like a savings account from where the you can withdraw money as per your requirement.
Under Atal Pension Yojana, you cannot withdraw the money invested before maturity. This means that if you change your mind after some time of investing in the scheme and you want to invest elsewhere, then it does not have this facility.
However, if the investor dies during this period or his health becomes seriously ill, then withdrawal can be considered.
In NPS, investors are given the option, where they can choose to according to their need or desire. On the other hand, under Atal Pension Yojana, no investment option is given to the investors.