Atal Pension Yojana Payouts Explained: Spouse Pension and Corpus Return to Nominee

Retirement in India increasingly comes down to a single question: do you want a guaranteed monthly cheque for life, or a corpus you draw down yourself and hope outlasts you? The Atal Pension Yojana (APY), run by the Pension Fund Regulatory and Development Authority (PFRDA), sits firmly on the guarantee side. It promises five fixed monthly pension slabs from age 60 -- Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 and Rs 5,000 -- and, crucially, extends that same amount to your spouse after your death before returning the accumulated pension wealth to your nominee. As of the most recent government figures, APY enrolments have crossed 9 crore subscribers, making it one of India's largest guaranteed-pension programmes.

This guide sets APY against the market-linked National Pension System (NPS) and a self-managed drawdown, so you can judge whether the trade-off -- certainty in exchange for a modest, fixed payout -- fits your household. Every figure below is drawn from PFRDA's published scheme rules and the Income-tax Act; where a number cannot be verified, it has been left out.

The Scheme Explained

APY is a defined-benefit pension: the payout is fixed in rupees at the outset, not linked to market returns. You choose one of five monthly pension slabs at the time of joining, and PFRDA works backwards to fix your contribution. Entry is open to Indian citizens aged 18 to 40 who hold a savings account with a bank, a regional rural bank or the Department of Posts, as PFRDA specifies on its Atal Pension Yojana scheme page. Because the maximum entry age is 40 and contributions run until 60, the minimum contribution horizon is 20 years.

Contributions scale with entry age, since a younger subscriber has more years to accumulate. The table below shows PFRDA's indicative monthly contribution for the youngest (age 18) and oldest (age 40) entrants, alongside the pension wealth returned to the nominee for each slab.

Two features define APY's payout structure. First, after the subscriber's death, the spouse is entitled to receive the same monthly pension for the rest of the spouse's life -- there is no reduction. Second, on the death of both subscriber and spouse, the nominee receives the pension wealth accumulated up to the subscriber's age of 60, shown in the final column above. The corpus figures follow a simple rule: the return to the nominee is 170 times the monthly pension, so a Rs 5,000 pension leaves Rs 8.5 lakh for the nominee.

Since 1 October 2022, income-tax payers can no longer open an APY account, following a Ministry of Finance gazette notification dated 10 August 2022. Anyone who is, or has been, liable to pay income tax is now barred from joining, though those who enrolled before that date continue undisturbed. A government co-contribution of 50 per cent of the subscriber's contribution or Rs 1,000 a year, whichever was lower, was available only to eligible subscribers who joined between 1 June 2015 and 31 March 2016 and ran for five years; it is not available to new entrants today.

A subscriber may raise or lower the chosen pension slab once per financial year, with PFRDA adjusting the contribution to match, so a household whose income grows can move from the Rs 1,000 slab up to the Rs 5,000 slab over time. Voluntary exit before age 60 is permitted, in which case the subscriber receives back only their own contributions plus the net accrued income on them, after deducting account-maintenance charges; the government co-contribution and its accrued income, where it applied to pre-2016 entrants, are not returned on early exit.

Missed contributions carry a penalty of Re 1 per month for every Rs 100 of contribution. An account is frozen after six months of non-payment, deactivated after twelve months and closed after twenty-four months, so a subscriber must keep the linked savings account funded for the monthly, quarterly or half-yearly auto-debit. For readers weighing APY against its market-linked cousin, our NPS calculator projects the very different, non-guaranteed corpus that NPS can build over the same horizon.

Tax on Withdrawal

APY is not a capital asset, so the long-term and short-term capital gains regimes -- 12.5 per cent on equity long-term gains and 20 per cent on short-term equity gains under the July 2024 rules -- simply do not apply to it. Instead, the tax treatment splits cleanly across the accumulation and payout phases.

During the accumulation phase, contributions to APY qualify for deduction under Section 80CCD(1) within the overall Rs 1.5 lakh ceiling of Section 80C, and the Central Board of Direct Taxes has clarified that the additional Rs 50,000 deduction under Section 80CCD(1B) also applies to APY. That extra Rs 50,000 deduction under Section 80CCD(1B) is available only under the old tax regime and is NOT allowed in the new tax regime; a subscriber who has opted into the new regime therefore gets no deduction for personal APY contributions. This distinction is set out in the deduction provisions on the department's portal at incometax.gov.in.

During the payout phase, the monthly pension is taxable in the hands of the subscriber -- and later the spouse -- as income in the year it is received, at the individual's applicable slab rate. There is no separate exemption for APY pension income. In practice, most APY pensioners fall below the taxable threshold: under the new regime for FY 2025-26, the Section 87A rebate now runs up to Rs 60,000, which fully offsets tax on total income up to Rs 12 lakh, so a household living largely on a Rs 5,000-a-month APY pension of Rs 60,000 a year typically pays no tax on it.

The corpus returned to the nominee on the death of both subscriber and spouse is a return of the accumulated pension wealth built up to age 60, not a market gain, so the equity capital-gains rates do not attach to it. Readers comparing this fixed annuity-style payout with a flexible systematic withdrawal plan can model both sides using our annuity vs SWP calculator.

Worked Drawdown

Consider Anjali, who joins APY at age 25 and selects the Rs 5,000 pension slab. Her indicative monthly contribution is Rs 376, which she pays until 60 -- a 35-year contribution horizon. From the month she turns 60, she receives a guaranteed Rs 5,000 a month, or Rs 60,000 a year, regardless of how markets behave. The power of the scheme shows up in what happens across the following decades, laid out below.

By this illustration, a Rs 5,000 slab that leaves an Rs 8.5 lakh corpus for the nominee has, over a 30-year combined lifespan, paid out Rs 18 lakh in pension and then returned the full Rs 8.5 lakh -- Rs 26.5 lakh of total value against a notional corpus of Rs 8.5 lakh. That gap is longevity pooling at work: because APY is a defined-benefit guarantee backed by the Government of India, the pension keeps coming even if the underlying investment would have run dry, and it is protected from the sequence-of-returns risk that can wreck a self-managed drawdown.

The contrast with a self-managed withdrawal is stark. If Anjali instead held an Rs 8.5 lakh corpus and withdrew Rs 60,000 a year, a run of poor early returns could exhaust it within roughly 15 to 18 years, leaving nothing for the spouse and no nominee payout. APY removes that risk entirely at the cost of a fixed, non-inflation-indexed rupee amount. To stress-test a self-directed alternative against this fixed pension, model it with our retirement drawdown calculator, which lets you vary the withdrawal rate and return assumptions year by year.

Where APY differs sharply from NPS is flexibility versus certainty. NPS builds a market-linked corpus with no guaranteed payout; at exit, at least 40 per cent must be used to buy an annuity, and the pension depends on annuity rates at that moment. APY fixes both the contribution and the payout at the start, so a subscriber knows on day one exactly what the spouse and nominee will receive. The table below distils the trade-off.

The two are not mutually exclusive: many households run a small APY account for a guaranteed floor and NPS on top for market upside, combining certainty at the base with growth potential above it.

FAQ

How much pension does the spouse get under APY after the subscriber dies?

The spouse receives the same monthly pension the subscriber was entitled to -- one of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 or Rs 5,000 -- for the remainder of the spouse's life, with no reduction, as set out in PFRDA's scheme rules. Only on the death of both the subscriber and the spouse does the payout stop, at which point the accumulated pension wealth passes to the nominee.

What corpus does the nominee receive under the Rs 5,000 slab?

The nominee receives Rs 8.5 lakh under the Rs 5,000 slab -- the pension wealth accumulated up to the subscriber's age of 60. The corpus scales with the slab at 170 times the monthly pension, so it is Rs 1.7 lakh for Rs 1,000, Rs 3.4 lakh for Rs 2,000, Rs 5.1 lakh for Rs 3,000 and Rs 6.8 lakh for Rs 4,000.

Can I still open an APY account if I pay income tax?

No. Since 1 October 2022, following a Ministry of Finance notification dated 10 August 2022, any citizen who is or has been an income-tax payer cannot open a new APY account. Subscribers who enrolled before 1 October 2022 are unaffected and continue to contribute normally.

Is the APY pension taxable when I receive it?

Yes, the monthly pension is taxable at your applicable slab rate in the year of receipt, with no special exemption. In practice, an annual APY pension of up to Rs 60,000 usually attracts no tax, because the FY 2025-26 Section 87A rebate of up to Rs 60,000 in the new regime covers total income up to Rs 12 lakh.

Can I claim a tax deduction for my APY contributions?

Yes, under the old tax regime. Contributions qualify under Section 80CCD(1) within the Rs 1.5 lakh Section 80C ceiling, and the Central Board of Direct Taxes has clarified that the additional Rs 50,000 under Section 80CCD(1B) also applies. The additional Rs 50,000 under Section 80CCD(1B) is NOT allowed in the new tax regime, so personal APY contributions earn no deduction under the new regime.

What happens if I miss my APY contributions?

A penalty of Re 1 per month applies for every Rs 100 of contribution. The account is frozen after six months of default, deactivated after twelve months and closed after twenty-four months, so keeping the linked savings account funded for the auto-debit is essential.

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

Yes. APY and NPS are separate PFRDA products and can be held together. A common approach is to use APY for a guaranteed pension floor of up to Rs 5,000 a month and NPS for additional, market-linked retirement savings, since NPS carries no guaranteed payout and its pension depends on annuity rates at exit.