One of the major advantages of enrolling in the Atal Pension Yojana (APY) is the tax benefits it offers. APY subscribers can claim deductions under the Income Tax Act, 1961, making it an attractive retirement planning option. This guide explains how you can maximize your savings through APY tax benefits.
Tax Benefits Under Atal Pension Yojna
Subscribers of APY can avail tax deductions under the following sections:
1. Deduction Under Section 80CCD(1)
Contributions to APY qualify for a tax deduction under Section 80CCD(1).
The deduction is available up to 10% of the subscriber’s gross total income.
The maximum deduction that can be claimed under Section 80CCD(1) is ₹1,50,000 per year, including other eligible deductions under Section 80C.
2. Additional Deduction Under Section 80CCD(1B)
An additional deduction of ₹50,000 per year is available under Section 80CCD(1B).
This deduction is over and above the ₹1.5 lakh limit of Section 80C.
This benefit is particularly useful for self-employed individuals and salaried taxpayers looking to maximize tax savings.
How Much Can You Save?
The table below shows how much you can save based on your APY contribution:
Annual Contribution (₹)
Deduction Under 80CCD(1) (₹)
Additional Deduction Under 80CCD(1B) (₹)
Total Tax Savings (₹) For 30% Tax Bracket
24,000 (₹2,000/month)
24,000
0
7,200
36,000 (₹3,000/month)
36,000
0
10,800
50,000 (₹4,166/month)
50,000
0
15,000
75,000 (₹6,250/month)
50,000
25,000
22,500
1,00,000 (₹8,333/month)
50,000
50,000
30,000
Key Takeaways
APY subscribers can claim tax benefits up to ₹2,00,000 per year combining Sections 80CCD(1) and 80CCD(1B).
Higher tax savings for individuals in the 20% and 30% tax brackets.
APY provides double benefits – a secured pension and tax advantages.
How to Claim APY Tax Benefits?
Ensure contributions are made through your bank account.
Download your APY account statement from the bank or NSDL website.
File your income tax return (ITR) and include APY contributions under deductions.
Conclusion
The Atal Pension Yojana is not just a retirement plan but also a great tax-saving tool. By contributing to APY, you not only secure your post-retirement future but also save significantly on taxes every year.
