Will your APY contribution get income tax deduction once subscription closes for income tax payers? However, investments made in Atal Pension Yojana are eligible for deduction under section 80CCD (1) of the Income-tax Act, 1961. Can an existing investor of the scheme continue to claim tax deduction under section 80C of the Income-tax Act?
The government has barred income taxpayers from investing in Atal Pension Yojana (APY) from October 1, 2022. The question that now arises is whether an existing APY investor can continue to claim a tax deduction on the investments made in the scheme.S Vasudevan, Executive Partner, Lakshmikumaran & Sridharan Attorneys, says, "The notification dated August 10, 2022, provides that with effect from October 1, 2022, income taxpayers cannot subscribe to 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."
Suresh Surana, founder of tax consulting group RSM India, says: "It is notable 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 says investors contributing to APY before October 1, 2022, would be eligible for deduction under Section 80CCD(1). However, a clarification in this respect would be highly appreciated from the government, Surana adds.
The income-tax benefit on Atal Pension Yojana was notified by the government on February 19, 2016. Those investing in APY were made eligible to get the same income-tax benefits that subscribers to any notified scheme - such as the National Pension System - get. It is important to note 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.
What is Atal Pension Yojana and who can invest in it?
Atal Pension Yojana was launched by the government on June 1, 2015, 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. An individual can opt for any of the following pension amounts:
a) Rs 1,000 per month
b) Rs 2,000 per month
c) Rs 3,000 per month
d) Rs 4,000 per month
e) Rs 5,000 per month
The contribution to APY can be made on a monthly, quarterly or half-yearly basis. The amount of contribution will depend on the amount of pension opted for and the age of the individual. The sooner an individual starts investing in the scheme, the lower the contribution amount.
For example, an individual starting to invest in the pension scheme from the age of 18 for a monthly pension of Rs 5,000 will have to pay a monthly contribution of Rs 210. On the other hand, an individual starting to invest at the age of 40 will have to make a monthly contribution of Rs 1,454. Do note the investments have to be continued till the age of 60. Hence, the minimum investment period is 20 years and the maximum is 42 years.
This story originally appeared on: India Times - Author:Tax Cognition
