APY contribution for guaranteed pension.
Monthly contribution required
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A pension scheme built for the unorganised sector
Atal Pension Yojana is the government’s answer to a hard problem: how do you give a guaranteed pension to the shopkeeper, the driver, the domestic worker, and the gig worker who have no employer-run EPF or NPS? APY does it by promising a fixed monthly pension of ₹1,000, ₹2,000, ₹3,000, ₹4,000, or ₹5,000 from the age of 60, in exchange for a small monthly contribution that you start paying now. The pension amount is guaranteed by the Government of India, which is what sets APY apart from market-linked products.
The earlier you start, the cheaper it gets
Because the corpus has more years to compound, your monthly outgo for the same pension drops sharply the younger you join. An 18-year-old pays roughly ₹210 a month for the top ₹5,000 pension; a 40-year-old joining at the last permitted age pays around ₹1,454 for the identical pension. That is the whole logic of the scheme in one number. The calculator uses the standard PFRDA contribution anchors and scales them to your chosen pension, so a ₹2,000 pension costs two-fifths of the ₹5,000 figure.
Worked example: joining at 25 for the full ₹5,000 pension
A 25-year-old who wants the maximum ₹5,000 monthly pension contributes about ₹376 a month until age 60. That is 35 years of contributions feeding a guaranteed pension for life thereafter, with the balance returning to the nominee on the subscriber’s death.
| Parameter | Value |
|---|---|
| Entry age | 25 |
| Target monthly pension | ₹5,000 |
| Years of contribution | 35 |
| Indicative monthly contribution | ₹376 |
| Pension corpus to nominee (₹5,000 tier) | ₹8,50,000 |
The chart shows how the indicative monthly contribution for the ₹5,000 pension rises with entry age.
Figures are indicative and scale linearly with the chosen pension. Always confirm the exact rupee contribution against the official PFRDA chart your bank uses at enrolment.
The rule change that made many people ineligible
This is the single most important eligibility point, and it surprises a lot of would-be subscribers. With effect from 1 October 2022, any citizen who is or has been an income-tax payer is no longer eligible to join APY. The scheme was always meant for the unorganised sector, and this amendment sharpened that targeting. If you joined after that date and are later found to have been a taxpayer on or before the application date, the account is closed and the accumulated pension wealth is returned to you, though the government co-contribution is not. So if you already file an ITR, APY is closed to you; NPS is the route to consider instead.
APY or NPS: which suits you
If you are eligible for both, the choice comes down to certainty versus upside. APY hands you a fixed, government-guaranteed pension; you know on day one that you will receive ₹5,000 a month and not a rupee more or less. NPS is market-linked, so a 25-year-old contributing the same modest amount into NPS equity could plausibly build a far larger corpus over 35 years, but with no guarantee and full exposure to market cycles. The flip side is that ₹5,000 a month, fixed for life with no inflation adjustment, will buy far less in 2060 than it does today. So APY is best understood as a safety-net floor for someone with no other retirement provision, not as a wealth-building engine. For a young, risk-tolerant saver who is not a taxpayer, splitting contributions, taking the APY guarantee as a base and adding NPS for growth, is often the more sensible play than relying on either alone.
What happens if you stop paying, and the auto-debit trap
APY runs on auto-debit from your savings account, and a failed instalment carries a small penalty: ₹1 per month for contributions up to ₹100, rising in steps for larger amounts. Leave it unfunded for too long and the account is frozen after 6 months, deactivated after 12, and closed after 24. Keep enough balance in the linked account around the debit date. One genuinely useful feature: you can increase or decrease your pension tier once a year, so you are not locked into the choice you made at enrolment.
Do I get any tax benefit on APY contributions?
Contributions to APY qualify for deduction under Section 80CCD(1), within the overall NPS limits. In practice this matters less now, because the people eligible to join APY since October 2022 are by definition non-taxpayers, for whom the deduction has no value.
What does my spouse or nominee receive?
On the subscriber’s death, the same pension continues for the spouse. After both have passed, the accumulated pension corpus (₹8.5 lakh for the ₹5,000 tier, scaling down for lower tiers) is paid to the nominee. So the contribution is never simply lost; it always returns to the family.