INSUBCONTINENT EXCLUSIVE:
In NPS, there is no limit on the maximum amount that can be invested.
If you've still not made your tax investments for this fiscal year, here are two schemes that may offer you
additional benefits over and above the limit of Rs 1,50,000 that is allowed under Section 80C of the Income Tax Act
National Pension System (NPS) and Atal Pension Yojana (APY) are two options for you
Both are government-run pension schemes with different features
While Atal Pension Yojana is focused on the unorganised sector, NPS is for all
Besides, entry age, contribution, returns and tax treatment are different too
Financial planners say one should make a decision based on the features that suit them best as per their personal needs
But to be able to make that decision, one has to learn the basic differences between pension schemes APY and NPS.Differences1
Age: The minimum required age to subscribe to both the Atal Pension scheme and NPS is 18 years
However the upper age limit varies
For NPS, a maximum age of 60 years is acceptable whereas for APY, this age limit is 40 years.2
Investment limit: In NPS, there is no limit on the maximum amount that can be invested
APY works on pre-defined monthly contributions to earn fixed pension, wherein the earlier one starts the lower is the monthly contribution
required to reach the desired pension goal
For example, someone starting as early as 18 years can contribute Rs 210 per month for 42 years to earn a pension of Rs 5,000.3
Minimum investment/contribution: NPS requires a minimum contribution amount of Rs 500 per contribution and a minimum contribution of Rs
Subscribers have to make a minimum contribution of one per financial year
APY comes with three modes of payment of contribution: monthly, quarterly and half-yearly
That means a minimum of two contributions are required every year
An 18-year-old subscriber to APY, for example, is required to pay Rs 42 per month or Rs 248 half-yearly for a pension of Rs 1,000 per month
after he or she turns 60.4
Returns: APY offers pre-defined returns, ranging between Rs 1,000 and Rs
5,000 (in multiples of 1,000)
However, NPS returns are linked to the markets, which means returns can vary depending on multiple factors, including market movement and
Who can subscribe: Opening an APY account requires the applicant to hold a savings account either with a bank or a post office
NPS is open to all citizens of India, including NRIs
However, OCI (Overseas Citizens of India) and PIO (Persons of Indian Origin) card holders as well as HUFs (Hindu Undivided Families) are not
eligible for opening of NPS account, according to the website of NSDL E-Governance Infrastructure, the central record-keeping agency for
Flexibility: APY comes with pre-defined contribution schedule based on the applicant's age and returns a fixed pension amount, based on the
NPS, being a marked-linked instrument, provides the applicant with an option to adjust allocation to different asset classes as per his or
These asset classes include equity, corporate debt and government securities
However, NPS also offers the "auto choice" option, which is meant for participants not looking to adjust their portfolio on their own.7
Type of account: Atal Pension Yojana offers only one type of account whereas NPS comes with two types of accounts: Tier I and Tier II
A Tier-I account is a non-withdrawable account wherein the subscriber cannot withdraw from it until he or she reaches the age of 60 years
The Tier-II account is a voluntary withdrawable account, which means there are no restrictions on withdrawals
Also, a Tier II account is an add-on account, which means a subscriber holding an active Tier 1 account can open an additional account in
the form of Tier II account.8
Premature exit: APY subscribers are allowed premature exit before the age of 60 years "only in exceptional circumstances, i.e., in the event
of the death/ terminal disease", according to retirement fund regulator PFRDA's website - pfrda.org.in.Similarities9
Pension in both the schemes starts after the subscriber attains the age of 60 years.10
APY enjoys the same tax benefits as NPS or National Pension System, which means a contributions paid in APY can be claimed for income tax
50,000 under Section 80CCD (1B) of the Income Tax Act, over and above the Rs
1.5 lakh allowed under Section 80C
In case of death of subscriber, the monthly pension is paid to the spouse.
