If you are considering retirement savings schemes in India, you can benefit from two prominent government programs designed to ensure financial security after retirement: The National Pension System (NPS) and Atal Pension Yojana (APY). Although NPS and APY aim to provide individuals with a regular income source after retirement, they differ in their approach, eligibility criteria, and features

NPS is a voluntary retirement savings scheme, while APY functions as a defined benefit pension scheme, offering a guaranteed pension upon retirement. The NPS returns are market-linked, meaning they fluctuate based on market performance. In APY, the pension amount depends on the chosen contribution level and the age of entry into the scheme. Additionally, both NPS and APY offer tax benefits on contributions under Section 80CCD(1) of the Income Tax Act.

Are you looking for a personal loan?

Difference Between NPS and APY

Proper retirement planning is necessary to live a secure and comfortable life after retirement. The government has introduced various pension schemes to help you in the post-retirement years. Among these schemes, the National Pension System (NPS) and the Atal Pension Yojana (APY) are the two prominent initiatives.

Refer to the table below to know the difference between NPS and APY.

Features NPS APY
Scheme Type Voluntary Retirement Savings Scheme Government-backed Pension Scheme
Age Limit (entry) 18-55 years 18-40 years
Nationality Criteria Indian Residents & NRIs Indian Residents Only
Tax Benefits Up to ₹2 lakh deduction under Section 80CCD and 80C No specific tax benefits

Read More

Read Less

Now, that we have seen the differences from the table above, let’s check each pension scheme from below.

National Pension Scheme

The National Pension Scheme is a defined contribution pension system introduced by the Government of India to provide a sustainable solution for retirement planning. There's no guaranteed payout at retirement, but rather the amount you receive depends on your contributions and the investment returns generated over time.

There are two NPS accounts: Tier I and Tier II. Tier I account is mandatory for government employees (except for armed forces) who joined after 2004. Tier II account is voluntary and anyone can open it.

National Pension System Eligibility

The National Pension Scheme in India is open to a wide range of individuals looking to build a retirement corpus. NPS offers voluntary retirement savings for a secure future. Here’s a list of eligibility criteria you should be aware of before joining NPS.

Age: Any Indian citizen (resident or non-resident) between 18 and 70 years old can enroll in NPS.

Employment Sector:

  • Government Employees: NPS is mandatory for all Government of India, State Government (including autonomous bodies) employees who joined service after a specific date.
  • Corporate Employees: If your company offers NPS as part of their employee benefits plan, you can join the scheme.
  • All Citizens: Even if you are self-employed or not covered under any of the above categories, you can still enroll in NPS under the "All Citizens of India" sector.

To join NPS, you'll need to comply with KYC norms and submit the required documents during the application process.

Don't know your credit score? You can find out for free!

Check Your Credit Score for Free

Also get a Free Credit Report

Features of National Pension Scheme

The table below shows the primary features associated with the National Pension Scheme.

Features Description
Type of Scheme Voluntary Defined Contribution
Investment Market-linked (Equity, Corporate Debt, Government Securities)
Investment Flexibility Choose asset allocation based on risk tolerance (multiple options available)
Returns Not guaranteed, depend on market performance

Read More

Read Less

Atal Pension Yojana

The Atal Pension Yojana (APY), also known as Atal's Pension Scheme, is a government-backed pension scheme in India. It's specifically designed to address the needs of the unorganized sector, which includes workers like maids, delivery personnel, street vendors, farmers (who are self-employed), construction workers, etc.

Atal Pension Yojana Eligibility

Atal Pension Yojana (APY) is designed to be accessible for many Indian citizens to plan for their retirement.

  • Age: Indian citizens between 18 and 40 years old are eligible to enroll. Early enrollment allows you to benefit from longer compounding of contributions and potentially higher retirement income.
  • Employment Status: APY has no restrictions based on employment status. Anyone can join, including salaried individuals, self-employed workers, and those working in the unorganized sector.
  • Savings Account: You'll need to have a savings bank account with a bank or post office in India to facilitate enrollment and monthly contributions.

Do you need an instant loan?

Features of Atal Pension Yojana

The table below shows the primary features and benefits of Atal Pension Yojana.

Features Description
Type of Scheme Defined Benefit
Investment Managed by Government
Returns Guaranteed pension based on chosen contribution tier and entry age
Tax Benefits No tax benefit on contributions

Read More

Read Less

Similarities Between NPS and APY

The National Pension Scheme and Atal Pension Yojana are two major government pension schemes in India aimed at providing retirement income security to citizens. Despite their differences in structure and target audience, both schemes share several similarities.

Here are some of the similarities between NPS and APY:

  • Both NPS and APY are designed to help individuals accumulate savings specifically for retirement, encouraging a long-term savings plan.
  • Both schemes are backed by the Indian government, offering a degree of security and stability.
  • Contributions to both NPS and APY qualify for tax deductions under Section 80CCD(1) of the Income Tax Act, up to a maximum of ₹1.5 lakh per year.
  • Upon reaching retirement age (60 years for both NPS and APY), both schemes offer a regular income stream in the form of a pension.
  • Both NPS and APY are overseen and regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

You can choose the National Pension Scheme if: You are young with a high risk tolerance and want to maximize potential returns for a larger retirement corpus. You can handle some market fluctuations.

You can choose Atal Pension Yojana if: You prioritize a guaranteed fixed pension and low risk. You are comfortable with a pre-determined pension amount and don't need investment flexibility.

Steps to Open an NPS Account

There are two main ways to open a National Pension System (NPS) account in India: online (using an eNPS portal of your chosen CRA) and offline (through PoP-SP).

Open NPS Account Online

  • Step 1: Visit the eNPS portal of your chosen Central Recordkeeping Agency (CRA).
  • Step 2: The online system allows registration using Aadhaar, DigiLocker or the traditional method.
  • Step 3: You can choose to open Tier I (Pension Account) and Tier II (Voluntary Savings Account) during registration
  • Step 4: The online portal will guide you through the process, including filling out an application form, uploading scanned documents, and making your initial contribution.
  • Step 5: Upon successful completion, you will receive your Permanent Retirement Account Number (PRAN) via email and SMS.

Open NPS Account Through PoP-SP

  • Step 1:Find the nearest Point of Presence - Service Provider (PoP-SP).Visit the PoP-SP and collect a PRAN application form.
  • Step 2:Fill out the form and submit it along with KYC documents (proof of identity, address, etc.)and your initial contribution.
  • Step 3:The PoP-SP will process your application and send it to the CRA.
  • Step 4:Step 4: You will receive your PRAN card by mail once your application is approved.

Apply For a Personal Loan with Easy Approval

Steps to Open an APY Account

There are two main ways to open an Atal Pension Yojana (APY) account in India: online and offline.

Online Account Opening

  • Step 1: Visit the chosen CRA's eNPS portal dedicated to online registration.
  • Step 2: The portal allows registration using your Aadhaar number or existing bank account details.
  • Step 3: Fill out the online application. Here, you'll link your Aadhaar with your mobile number (if not already done) and select your desired monthly pension amount (ranging from Rs. 1000 to Rs. 5000).
  • Step 4: After submitting the application, you'll receive a one-time password (OTP) for verification on your registered mobile number.
  • Step 5: Upon successful completion, you'll get an acknowledgment with your APY account details.

Offline Account Opening

  • Step 1: Find your nearest Point of Presence - Service Provider (PoP-SP).
  • Step 2: Visit the PoP-SP and request an APY registration form.
  • Step 3: Fill out the form carefully, including your details, preferred monthly pension amount, and nominee information.
  • Step 4: Submit the completed form along with your KYC documents (proof of identity, address, etc.) and your initial contribution amount.
  • Step 5: The PoP-SP will process your application and forward it to the CRA for approval. Once approved, your APY account will be activated.

Apply For a Personal Loan now!

Check more on National Pension Scheme from the links in the table below:

National Pension Scheme Eligibility NPS Online Payment
NPS Returns NPS Tax Benefit

To know more about Atal Pension Yojana, check the links below:

Atal Pension Yojana Chart APY Balance Check
APY PRAN Number Search Atal Pension Yojana Statement
Atal Pension Yojana Eligibility Atal Pension Yojana Benefits
SBI Atal Pension Yojana Atal Pension Yojana Exit Policy

Frequently Asked Questions

Yes, you can participate in both NPS and APY in India. NPS offers potentially higher returns with market risks and flexibility, while APY provides a guaranteed pension with lower risk and less flexibility.

It depends on your goals. NPS offers potentially higher returns with market exposure but comes with risk. Traditional pensions offer guaranteed income but may have lower payouts.

Yes, salaried individuals can invest in NPS. They can either opt for their employer to offer NPS as part of their benefits package, or they can enroll independently under the "All Citizens of India" category.

Contributions to both NPS and APY qualify for tax deductions under Section 80CCD(1) of the Income Tax Act, allowing you to save up to ₹1.5 lakh on taxes each year. With this, you can boost your retirement savings while lowering your current tax burden.

Yes, you can participate in both NPS and APY in India. This allows you to combine the guaranteed pension of APY with the potentially higher returns of NPS, for both your risk tolerance and retirement income needs.

Display of trademarks, trade names, logos, and other subject matters of Intellectual Property displayed on this website belongs to their respective intellectual property owners & is not owned by Bvalue Services Pvt. Ltd. Display of such Intellectual Property and related product information does not imply Bvalue Services Pvt. Ltd company’s partnership with the owner of the Intellectual Property or proprietor of such products.

Please read the Terms & Conditions carefully as deemed & proceed at your own discretion.