It has been decided to exclude income taxpayers from Atal Pension Scheme or Yojana (APY) after review, said Sanjay Malhotra, Department of Financial Services (DFS) Secretary in a conversation with CNBC-TV18.
The schemes are always evolving, with new data, with new experience and now almost seven years into the scheme we did realise this is a change we should bring about, he said.
"The changes will be implemented only from October 1, 2022 and this grace period has been given to make the changes. The government is guaranteeing the pension irrespective of fund performance. So, if an individual has not paid earlier. he/she is eligible for APY. Initially, the enrollment will be on self-certification basis," Malhotra said.
He said these tweaks have not come about due to any fiscal concerns. "As taxpayers, we would not expect…the common citizen would not expect subsidies and subventions to go to taxpayers and I think it’s in that context this change was made," he added.
Why have taxpayers been excluded now?
He said that apart from the co-contribution, the government is guaranteeing the pension, irrespective of the returns that the fund may have been able to generate.
"Experience has now shown us that the contribution that the government is making for the years that the fund generated less than the returns that were anticipated, and the amount is quite substantial. It is around Rs 270 crore in one year, which is now to be made good over the next 20 years. This is the number as of now. We don't know what happens going forward, so that is why it was thought that when we went for extension of the scheme, at that time this issue was discussed and it was decided that we should discontinue the scheme for income tax payers," Malhotra added.
Self declaration and new eligibility rules
Malhotra said that it is quite possible that one year people are paying tax and the other they are not. But, what is important is that if they have paid the tax or they were liable to pay it in any of the previous years. "If they have not paid tax in any of the previous years, then they are eligible. Even if they become a taxpayer later or after October 1, say in 2025 or 2026, they will continue to be eligible and getting the benefits, which means they have to continue the contributions," he said.
To start with, taxpayers will have to self-certify. "That's a minimum," Malhotra said. He said there is enough data available with the government and they can always tie up with the CBDT and find out, to check for the eligibility. But primarily, to start with, at least it is going to be on a self-certification, self-declaration-basis, he said.
"I am clarifying that if you have paid tax in any of the previous years, you may not be paying this year, but you maybe paying it say 2 years ago, so you are ineligible. Even though you have not paid tax for the last year. But say two to three years ago, you had, then you are ineligible. But if you become a tax payer later on, in the future, then that does not change your eligibility. You continue to be eligible if you were a non taxpayer at the time of enrollment, that is the key," he said.
On other schemes — PMJJB, PMSBY
Malhotra said that there is no plan to change the eligibility rules for the PMJJB, PMSBY as of now. "They are self enhancing schemes. There is no subvention or contribution from the government and it is basically the subscriber who pays the premium. Recently, the rates been revised as the claim ratio was very adverse so the insurance companies had approached us. So, we revised the rates upwards. But there is no change in eligibility or other conditions of the scheme concerned," he said.
He said they don't expect losses to continue on PMJJBY, PMSBY after the rate changes. "There may be some concern. We have taken a little conservative approach over there. However, we have kept the option open. These rates are due for revision annually and next year again we will have a look," he added.
About the APY scheme
Earlier, the Finance Ministry said that a person paying income tax will not be eligible to open Atal Pension Yojana (APY) account from October 1, 2022.
APY is a guaranteed pension scheme for Indians that focuses primarily on those working in the unorganised sector. Under this, an investor will receive a minimum guaranteed pension of Rs 1,000 to Rs 5,000 per month from the age of 60 years, depending upon his/her contribution.
The same pension would be paid to the subscriber's spouse after the subscriber's demise, and on the demise of both the subscriber and spouse, the pension wealth accumulated till age 60 of the subscriber would be returned to the nominee.