Cabinet Extends Atal Pension Yojana Support to 2030-31 as Enrolments Cross 8.66 Crore

On 21 January 2026 the Union Cabinet approved the continuation of the Atal Pension Yojana (APY) and extended funding support for its promotional, developmental and gap-funding activities until the financial year 2030-31, according to the Pension Fund Regulatory and Development Authority (PFRDA). More than 8.66 crore subscribers have enrolled since the scheme launched in 2015, and the Cabinet described APY as India's flagship guaranteed pension scheme for the unorganised sector.

The decision settles a question that many savers face when they retire in their late 50s or early 60s: should the foundation of your old-age income be a scheme that guarantees a fixed rupee amount, or one that hands you a market-linked corpus you must draw down yourself? APY answers the first question and the National Pension System (NPS) answers the second, and both are regulated by PFRDA under the same statute. This article compares the two on rules, tax and, crucially, the drawdown you actually live on after 60.

The confirmation until FY 2030-31 also draws a clear line between APY and schemes that have been shut. The Pradhan Mantri Vaya Vandana Yojana closed for new subscriptions on 31 March 2023, and the Mahila Samman Savings Certificate stopped accepting deposits on 31 March 2025. APY, by contrast, remains open, government-backed and now funded for at least five more years.

The Scheme Explained

Atal Pension Yojana is a defined-benefit-style scheme: you choose the pension you want, and PFRDA fixes the contribution needed to fund it. Any Indian citizen aged 18 to 40 with a savings bank account can join, and the guaranteed monthly pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 or Rs 5,000 begins at age 60. Because entry closes at 40, the minimum contribution horizon is 20 years and the maximum is 42 years. Since 1 October 2022 anyone who is, or has ever been, an income-tax payer is barred from opening a new APY account, a change we covered in detail in our note on why income-tax payers can no longer open an APY account.

The contribution is fixed at entry and never changes for the pension you selected. The table below reproduces the PFRDA contribution chart for selected entry ages, showing the monthly amount needed for each guaranteed pension. You can run any age with our Atal Pension Yojana calculator.

Two structural guarantees make APY a genuine defined-benefit product. First, the pension amount is assured by the Government of India; if the scheme's actual returns fall short, the shortfall is met from the budget, which is precisely what the "gap funding" in the 21 January 2026 Cabinet approval pays for. Second, on the subscriber's death the same pension continues to the spouse, and on the death of both the subscriber and spouse the accumulated corpus is returned to the nominee. That corpus is fixed at Rs 1.7 lakh for the Rs 1,000 pension and rises to Rs 8.5 lakh for the Rs 5,000 pension.

In its early years the scheme also carried a co-contribution. For subscribers who joined between 1 June 2015 and 31 March 2016, were not income-tax payers and were not covered by any statutory social security scheme, the Government co-contributed 50% of the subscriber's contribution or Rs 1,000 a year, whichever was lower, for five years from FY 2015-16 to FY 2019-20. That window has closed, so anyone joining in 2026 funds the full contribution from the chart above.

The National Pension System sits at the opposite end of the design spectrum. It is a defined-contribution scheme: you and, in many cases, your employer pay in, the money is invested across equity, corporate bonds and government securities by PFRDA-appointed fund managers, and your final corpus depends on the market. NPS accepts entrants far beyond the traditional retirement age, a point we examined in our piece on how NPS entry is open to Indian citizens well past 60. At the end of 2026 the combined pension corpus told the story of scale: NPS assets crossed Rs 17.7 lakh crore and APY enrolments topped 9 crore, as set out in our pension corpus review for 2026.

Tax on Withdrawal

The two schemes are taxed very differently at the point you start drawing income, and the distinction turns on how each pays out. APY does not pay a lump sum to the subscriber at all; it pays a monthly pension from age 60. That pension is taxable in the subscriber's hands under the head "income from other sources" at the applicable slab rate for the year of receipt, exactly like any other annuity. For a retiree whose total income in FY 2025-26 stays within Rs 12 lakh under the new regime, the Section 87A rebate of up to Rs 60,000 can bring the tax on a modest APY pension down to nil.

Contributions into APY qualify for deduction under Section 80CCD(1B) of the Income-tax Act, up to Rs 50,000 a year, but only if you file under the old tax regime. Section 80CCD(1B) is not allowed in the new regime, so a subscriber who has opted for the new regime gets no 80CCD(1B) deduction for APY contributions and simply pays tax on the pension later. Because income-tax payers can no longer join APY, in practice the deduction now matters mainly to those who enrolled before 1 October 2022 and later began paying tax.

NPS withdrawal at 60 is governed by Section 10(12A) of the Income-tax Act. On superannuation, up to 60% of the total accumulated corpus can be taken as a tax-exempt lump sum, and at least 40% must be used to buy an annuity from a life insurer. The lump-sum commutation of up to 60% is fully exempt; the 40% that buys the annuity is not taxed at the point of purchase, but the annuity income it later pays is taxable at slab rates each year. The table sets out the treatment side by side.

A common trap is to treat the NPS 60% lump sum as fully spendable while forgetting that the 40% annuity income is taxable every year for life. The Central Board of Direct Taxes treats that annuity as ordinary income, so a large NPS corpus can still generate a slab-rate tax bill in retirement even though the initial withdrawal was exempt.

Worked Drawdown

Consider Meera, who enrols in APY at 25 for the maximum Rs 5,000 monthly pension. From the PFRDA chart her fixed contribution is Rs 376 a month for 35 years to age 60. Her total outlay is Rs 376 x 12 x 35 = Rs 1,57,920 across three and a half decades. From 60 she draws a guaranteed Rs 5,000 a month, or Rs 60,000 a year, for the rest of her life; if she lives to 85 that is Rs 15 lakh of pension against Rs 1.58 lakh contributed. On her death the same Rs 5,000 continues to her spouse, and when both have died the nominee receives the fixed Rs 8.5 lakh corpus.

Now place the same person in NPS, contributing Rs 5,000 a month, roughly thirteen times the APY contribution, for the identical 35 years. The outcome is not guaranteed, so the figures below are an illustration at an assumed 9% annualised return, which PFRDA does not promise and which will vary with markets. On that assumption the corpus at 60 is about Rs 1.47 crore. Splitting it 60:40 gives a tax-exempt lump sum of roughly Rs 88 lakh and an annuity purchase of about Rs 59 lakh; at an assumed annuity rate of 6% that annuity pays around Rs 29,000 a month, taxable at slab.

The comparison exposes the real trade-off. APY delivers certainty at a tiny contribution: Rs 376 a month secures Rs 5,000 for life with a state backstop confirmed until FY 2030-31. NPS can deliver far more income, roughly Rs 29,000 a month in this illustration, but only by contributing about thirteen times as much and by accepting that the number moves with equity and bond markets. Many retirees use both, treating APY as a guaranteed floor and NPS as the growth layer, and then manage the NPS drawdown separately. To model an NPS payout, our NPS calculator projects the corpus, while the annuity versus SWP calculator compares buying an annuity with running a systematic withdrawal plan, and the retirement drawdown calculator tests how long a corpus lasts at a chosen withdrawal rate.

One design point deserves emphasis for planning. APY has no drawdown risk because there is no corpus to run down: the Rs 5,000 is paid whether markets rise or fall and whether you live to 70 or 100. NPS carries longevity and sequence-of-returns risk on the 60% you commute, which is why the mandatory 40% annuity exists as a floor. Layering a guaranteed Rs 5,000 APY pension beneath a market-linked NPS drawdown converts part of that uncertainty into a certainty backed, as of 21 January 2026, by the Union budget.

FAQ

Is Atal Pension Yojana still open in 2026?

Yes. The Union Cabinet approved the continuation of APY on 21 January 2026 and extended funding support until FY 2030-31, according to PFRDA. More than 8.66 crore subscribers have enrolled since the 2015 launch, and any Indian citizen aged 18 to 40 who is not an income-tax payer can still join.

Can I have both APY and NPS at the same time?

Yes. APY and NPS are separate schemes and holding one does not bar the other, provided you meet each scheme's eligibility. Many savers keep APY as a guaranteed Rs 1,000-5,000 monthly floor and use NPS as the market-linked growth layer, then compare payout options using the NPS calculator.

How much pension does APY actually pay?

APY pays a fixed monthly pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 or Rs 5,000 from age 60, chosen at entry. The contribution is set by the PFRDA chart: a 25-year-old pays Rs 376 a month for the Rs 5,000 pension, while a 40-year-old pays Rs 1,454 a month for the same benefit.

Is APY pension taxable after 60?

Yes. The monthly APY pension is taxable at your slab rate under the head "income from other sources" in the year you receive it. However, the Section 87A rebate of up to Rs 60,000 under the new regime for FY 2025-26 means a retiree whose total income stays within Rs 12 lakh may pay no tax at all on a modest pension.

What happens to my APY money if I die?

On the subscriber's death the same monthly pension continues to the spouse for life. When both the subscriber and spouse have died, the accumulated corpus, fixed at Rs 1.7 lakh for the Rs 1,000 pension up to Rs 8.5 lakh for the Rs 5,000 pension, is returned to the nominee.

Does APY qualify for a tax deduction?

Contributions qualify for deduction under Section 80CCD(1B) up to Rs 50,000 a year, but only under the old tax regime. Section 80CCD(1B) is not allowed in the new regime. Since income-tax payers have been barred from joining since 1 October 2022, the deduction now chiefly benefits those who enrolled earlier and later began paying tax.

Which is better for retirement, APY or NPS?

Neither dominates. APY guarantees a fixed Rs 5,000 for as little as Rs 376 a month from age 25, backed by the Government until FY 2030-31, but caps out at Rs 5,000. NPS can pay far more, around Rs 29,000 a month on a 9% illustration, but the outcome is market-linked and not guaranteed. A common approach is APY for the floor and NPS for growth.