Ask Money Today: How to settle death cases under Atal Pension Yojana?

My father recently died. He was a subscriber to the Atal Pension Yojana. His retirement at 60 was still 10 years away. What should we do with this account? Can my mother redeem all amount now? If she does, what will be the taxability of it?

- Madhur Kedia

By Raj Khosla, founder and MD, MyMoneyMantra

Atal Pension Yojana (APY) is managed by Pension Fund Regulatory and Development Authority (PFRDA). It is a guaranteed pension scheme provided by Government of India. The GOI contributes 50% of the contributor's amount or Rs 1,000 (whichever is lower) annually for five years as a guaranteed benefit under the scheme. After 60 years, the subscriber is entitled to enjoy guaranteed monthly pension of Rs 1,000/ 2,000/ 3,000/ 4,000 or 5,000. The pension plan is fixed by the government basis the age, and the contributions made by subscribers.

However, in case of death of the subscriber before 60 years, the spouse is a default nominee for APY. In the given case, your mother has two options -- A) continue contribution in the APY account till the original vesting age i.e. further 10 years and maintain the account in her name, B) Or, withdraw the amount from the account. If she opts for continuation of the pension scheme, annuity would be paid till her lifetime. If she opts out, the entire accumulative corpus under APY will be returned to your mother.

The amount/ pension received under APY is treated as taxable income. The beneficiary would be taxed as per applicable income tax slab.

To proceed for APY redemption or continuation, contact the Bank or Post Office where the account was held and check the status of the account. Make sure APY account is active, as those accounts where the contributions are halted/defaulted consecutively would be terminated automatically. Furthermore, know that your mother will require to submit certain documents for making the claim: Original death certificate of father, KYC of mother, Proof of bank account details of mother, Mother's relationship proof with father. The branch will guide you through the requisite forms and procedures.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)

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