NPS vs APY Scheme – Difference between National Pension Scheme and Atal Pension Yojana

APY and NPS are two options to choose from while considering investment plans to create corpus for your financial independence after retirement. Let us compare the two retirement plans NPS vs APY to make the best choice. 

Retirement is a phase in life when people normally do not work as actively as during their working years. Hence, the monthly income that is received is also not that regular or stable like in the case of salary received from jobs. But when it comes to expenses, they remain more or less similar even after retirement, especially with increased healthcare costs etc. Hence, you definitely need a regular flow of money coming in to lead a normal life after you are retired. And if you do not plan it in your young age when you are earning well, you may have to spend your retired life amidst all sorts of worries rather than spending some relaxed time.

Let us compare the difference between NPS and Atal Pension Yojana in this post to understand the policies so that you can plan your retirement accordingly.

What is National Pension Scheme (NPS)?

NPS is a retirement scheme launched by the government of India where an individual can invest until the age of 65 years. It is a policy offering market-linked benefits to the policyholder depending on the financial market. NPS allows the investor to choose from four types of funds where the policyholder can invest. Once the policy matures, the policyholder can withdraw 60% of the accumulated amount as lump sum, while the remaining 40% can be received as annuities for the rest of his/her life.

What is Atal Pension Yojana (APY)?

The APY full form is Atal Pension Yojana, which is another retirement policy being launched by the government of India. This is another guaranteed pension plan that serves the people of the low income group in the unorganized sector. The policyholder under the APY scheme can invest in the policy until he/she turns 40 years. However, the maturity of the policy is reached at 60 years of the policyholder.

There are five different choices of corpus that are guaranteed under the scheme ranging between INR 1000 to INR 5000. Hence, under the APY scheme the policyholders can invest the amount as per their requirement. The policyholder has to take into account various aspects such as age of the policyholder, pension amount expected and the frequency of contribution to calculate the corpus benefit to be received under the scheme. Once the policy matures, the pension amount is  paid to the policyholder and his/her spouse for the rest of their life. Further, the policyholder also gets the benefit of Atal Pension Yojana income tax deduction under this plan.

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NPS vs APY: Key Differences between the NPS and APY Scheme

The table below shows a comparison to indicate the key difference between the Atal Pension Yojana vs. NPS:

Similarities Between the National Pension Scheme (NPS) and Atal Pension Yojana (APY)

You have seen the differences between Atal Pension Yojana and NPS. Let us now take a look at the similarities of the two policies below:

• Both APY and NPS are managed by the Pension Fund Regulatory & Development Authority Act (PFRDA)
• Both of them are pension oriented plans launched to help policyholders to create a corpus as retirement wealth
• In both cases, once the policy matures, the policyholder receive a fixed amount as pension for the rest of his/her life
• In case of both the policies, the policyholder can avail tax deduction of up to INR 1.5 lakh on the investment amount along with an extra deduction of INR 50,000 under Section 80CCD (1B)
• Also, in case of both the policies, the pension amount received is taxable as per the existing tax rules.

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To Sum Up

It is very important to invest during your working years to lead a stress-free retired life. Irrespective of whichever policy you choose the main aim of the plan, which is offering a good life after retirement to the individual, should be fulfilled. In that regard, both Atal Pension Yojana and the National Pension Scheme allow financial security for individuals after retirement. The policyholders can use an NPS calculator to calculate the sum of money that they need to invest to get the desired returns.

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