Why You May Not Be Able To Open An APY Account With Rs 12 Lakh Per Annum Annual Income

The Atal Pension Yojana (APY) is a voluntary and contributory government retirement scheme that provides a guaranteed pension to the subscriber. It is specifically designed for workers in the unorganised sector who are not covered by the Employees’ Provident Fund Organisation (EPFO). Recent data shows that the number of APY subscribers has increased to over 76.5 million as of April 2025, with around 48 per cent participation of women.

APY was launched in 2015. Under this, a subscriber can choose a monthly pension amount of either Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000, or Rs 5,000. The monthly contribution is determined based on the selected pension amount.

Subscribers start receiving their pension after turning 60 years old. In the event of the subscriber's death, the same monthly pension amount is paid to the spouse. After the death of the spouse, the total accumulated corpus (at the time the subscriber turned 60) is returned to the legal heir.

Who Can Open An APY Account

The scheme is available to all resident Indians between 18 and 40 years of age. However, one of the other eligibility criteria is that the applicant should not be an income taxpayer. This clause is ambiguous because, with the introduction of new tax regimes, one may be a taxpayer in one regime but not in the other. So, how eligibility is to be decided for the scheme, is a question.

The increase in the subscriber base shows that more people do not fall under the taxpayer status, which is an eligibility criterion to enrol under APY. However, it cannot be said with certainty whether this is because of increased awareness, low income, or an increase in the income tax rebate ceiling to Rs 12 lakh.

Note that the scheme was available to all Indian citizens irrespective of their taxpayer status. But at present, only non-income taxpayers are allowed to open the account.

At present, there are two tax regimes in existence and taxation rules have also changed significantly effective financial year 2025-26, where income-tax rebate limit is increased to Rs 12 lakh and income from shares, mutual funds, and other capital gains remains taxable irrespective of the salary income level. So, the confusion could be how the taxpayer status would be determined for APY eligibility.

So, will an individual earning up to Rs 12 lakh be eligible for opening an APY account from FY2025-26?

Says Kinjal Bhuta, CA and advocate, secretary, Bombay Chartered Accountants’ Society: “Yes, if the person is claiming rebate under Section 87A of the Income-tax Act, 1961 and pays no tax on the income, the person is eligible for the APY account.”

Would Having Capital Gain Income Make A Person Ineligible To Open An APY Account?

Bhuta also clarified on whether income from capital gains would render an individual ineligible for opening an APY account. He said: “The FAQs issued on the Atal Pension Yojana clearly mentions that any kind of tax paid as on the date of application, will make the person ineligible. So, in case the person has to pay tax on capital gains, then the APY account cannot be opened. However, there may be cases where the person has only capital gain income which is less than the minimum threshold of slab limits, and therefore no tax is paid at all, in such cases the APY can be availed. So, the applicability has to be tested on a case-to-case basis.”

Notably, a person may fall in to the taxable category under one tax regime, but not under the other. In such cases, if a person chooses a tax regime that incurs no tax liability while filing an Income tax return (ITR), the person remains eligible for APY. However, if there is any deduction of tax at source (TDS) and the same has been withheld, that would also mean that the person is a taxpayer and will accordingly become ineligible, adds Bhuta.

So, determining the income tax-payer criteria for opening an APY account is not straightforward. This is because every individual has a unique combination of investments and tax liability. 

What Happens If A Subscriber Becomes A Taxpayer In Future

If a person at the time of joining APY is not an income taxpayer but starts earning more in the future and falls in the taxable category, the account will be closed depending on their date of joining the scheme.

Preeti Zende, a Securities and Exchange Board of India-registered investment adviser (Sebi RIA) and founder of Apanadhan Financial Services, says, “After October 1, 2022, criteria and rules for APY are changed. Now a taxpayer cannot join APY. The subscribers’ non-tax status is determined after verifying whether they pay taxes or not through the Income-tax website. If a person has been or becomes a taxpayer after joining the schemes his account will be closed and the accumulated amount will be returned.”

However, those who have opened the account before October 1, 2022, will continue to exist even if the income falls into the taxable category.

For any doubt, one can get their eligibility checked at the point of presence (PoP) through an Aadhaar and mobile number.