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APY vs NPS: Which is better out of Atal Pension Yojana and National Pension System?


APY vs NPS: A subscriber needs to be at least of 18 years of age to open an NPS account. (Reuters)

APY vs NPS: All a person needs to do to save his/her hard-earned money is to invest in the right investment product at the right time. Two government-run schemes which offer maximum benefits after retirement are Atal Pension Yojana (APY) and National Pension System (NPS). While APY was launched by Finance Minister Arun Jaitley in 2015, NPS was is a much older scheme. On one hand, where NPS is for everyone, APY is focused on the unorganised sector. According to a circular released by the Income Tax Department in 2016, contribution to the APY will be eligible for the same tax benefits as those of NPS. But what makes NPS and APY different from each other?

1- Age: A subscriber needs to be at least of 18 years of age to open an NPS account. The maximum age is 55 years. As for APY, a person needs to be 18 years or above to apply for the pension scheme. The maximum age is 40 years.

2- Investment: While for NPS there is no maximum limit for investing, APY functions on pre-determined monthly contributions. If a person starts investing as early as 18 years and invests Rs 210 per month for 42 years, then after contributing for the aforementioned period, he will earn Rs 5,000.

3- Minimum investment: A subscriber needs to contribute a minimum of Rs 500 per month under the NPS scheme, while under APY a contributor has three payment modes of contribution: monthly, quarterly and half-yearly. A person is required to pay Rs 42 per month or Rs 125 quarterly to get a minimum guaranteed return of Rs 1000.

4- Returns: Under the APY scheme, the returns are pre-defined. The returns range between Rs 1000 and Rs 5000. As for NPS, returns are linked to the markets. It means the returns for NPS subscribers can vary depending on various factors like market movement.

5- Premature Withdrawal: APY subscribers are not allowed to withdraw the money before the term ends. However, if the contributor dies, or has a medical condition, s/he may be able to withdraw the amount. As for NPS, only Tier 2 accounts will allow premature withdrawals.

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