Does it make sense to invest in a 401k for a short term?

Mohit left the following comment on the Suggest a Topic page recently:

Mohit Agrawal March 18, 2015 at 8:13 pm [edit]


I would love to know your views on investing in 401(k) in USA if a NRI plans to remain in USA short term like 5-7 years. Is it still worth it?
Because the tax you save and employee matching comes down to around 40% benefit. But when you cash out your 401k account when you leave for India you have to pay tax on that amount in USA at around 30% and then 10% is penalty. Is is really worth the hassle to invest in 401(k) in USA? or should I be investing that money in India

First, let’s take a look at what happens when you prematurely withdraw money from your 401k

  1. Negative: You pay 10% of the withdrawal money as penalties because this is a retirement account, and you are supposed to keep money in it till retirement.
  2. Neutral: Pay taxes that you had saved in previous years on the money withdrawn at the time of withdrawal because you didn’t keep your money for as long as you said you would.
  3. Positive: You keep the employer match to your 401k intact as long as there were no vesting rules that were flouted, so this is free money that you still got to keep.

If you think of these three factors, you can look at your own situation, do a rough calculation of how much free money you are getting, how much you will pay in penalty, and then treat the penalty as simply reduction of the free money you get from your employer’s match. In most situations, I would imagine that the employer match will take care of your penalty, so from a numerical standpoint it will make sense to invest in a 401k for even if it is for a short term like five or six years.

Now, the next thing to consider is whether this employer match is a big enough sum that you couldn’t accumulate while investing in India for four or five years, and that’s a tricky question. I believe that the match will still edge out the high interest rates in India, but perhaps not the high equity returns.

The last thing to consider is that when you are withdrawing the money, you will effectively have to pay around half of it in taxes and penalties, and based on your salary, 401k contribution and employer’s match, the money that you get at the end may not be worth the little hassle you go through during the five or six years for investing it.

So, I think whether you invest or not is based on your situation, and how comfortable you are with the idea of a penalty, and paying a big sum as taxes at the end as opposed to extracting whatever benefit you can from this investment.

India v Australia Record at ICC Events

India is going to play Australia in the semi finals of the current world cup on Thursday next week, and I hope that India continues their great form, and beats Australia to reach the final.

India has had great form in the World Cup but terrible form in Australia just prior to the World Cup so you can use either of those performances to back your prediction, and I imagine most people around you are doing exactly that.

I’m using the World Cup performance myself to back up my prediction that India will win, and I was just curious to see how the two teams have performed in general in ICC events.

Australia has done better than India as the table below shows, but India has won a fair a bit too. But if you just consider World Cups, India has won 3 and Australia has won 7 so there Australia is much better.

India v Australia - ICC History

It is going to be a great game, and all the best to the India team!

Inox Wind Limited IPO Review – Subscribe or Not?

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at

After a poor response to the Initial Public Offers (IPOs) of Ortel Communications and Adlabs Entertainment, Inox Wind Limited is knocking your doors to raise money for its expansion plans. The company is in the business of manufacturing wind turbine generators (WTGs) and plans to raise approximately Rs. 700 crore in this Initial Public Offer (IPO). The issue got opened yesterday, March 18th and will get closed tomorrow, March 20th.

About Inox Wind Limited & its Business

Inox Wind Limited is a company promoted by Gujarat Fluorochemicals Limited (GFL) and incorporated on April 9, 2009. Inox Wind is one of India’s leading providers of integrated wind energy solutions. The company manufactures WTGs and its major components, provides turnkey solutions by supplying WTGs and offering services including wind resource assessment, site acquisition, infrastructure development, erection and commissioning and also long term operations and maintenance of wind power projects.

Inox Wind has an order book for WTGs with aggregate capacity of 1,258 MW, comprising orders for supply and erection of WTGs with aggregate capacity of 694 MW and orders for only the supply of WTGs with aggregate capacity of 564 MW.

Inox has an exclusive license from AMSC Austria GmbH (AMSC), a NASDAQ listed leading wind energy technology company, to manufacture 2 MW WTGs in India and a non-exclusive license to manufacture the same outside India, based on AMSC’s proprietary technology.

Currently, the company has a combined manufacturing capacity of 800 Mw at two of its manufacturing facilities — Una in Himachal Pradesh and Ahmedabad in Gujarat. The company plans to double its capacity by the end of FY 2016. The company is also progressing very well at its Madhya Pradesh plant.

GFL currently holds 75% stake in Inox Wind and will continue to own a substantial stake in the company after the completion of this issue.

What’s on Offer?

Inox Wind has fixed its price band to be between Rs. 315-325 per share and is offering Rs. 15 per share discount to the retail investors and its eligible employees. The issue is a mix of fresh issue of 1.32 crore shares and offer for sale of 1 crore shares by its promoter, Gujarat Fluorochemicals Limited (GFL). Inox Wind will not receive any proceeds from the share sale by GFL.

The company will be issuing a total of approximately 2.32 crore shares to the investors as the offer gets fully subscribed. 35% of the issue size is reserved for the retail individual investors. At Rs. 325 per share, the company is expected to raise approximately Rs. 700 crore in the offer and GFL is expected to garner approximately Rs. 325 crore.

Approximately 94.25 lakh shares have been issued to the Anchor Investors, namely Sundaram Mutual Fund, IDFC Fund, FIL Investments (Mauritius), SBI Infrastructure Fund, Grandeur Peak Global Reach Fund, Blackrock India Equities Fund (Mauritius), Reliance Capital Trustee Company, Morgan Stanley Investment Management, Tata AIA Life Insurance Company, Birla Sun Life Insurance Company, Kotak Fund, Goldman Sachs India Fund, Swiss Finance Corporation (Mauritius) and Indus India Fund (Mauritius).

Bid Lot Size – Investors need to bid for a minimum of 45 shares and in multiples of 45 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 13,950 at the upper end of the price band and Rs. 13,500 at the lower end of the price band.

Objective of the Issue – The company plans to use the IPO proceeds to expand and upgrade its existing manufacturing facilities by spending Rs. 147.48 crore, to invest Rs. 131.54 crore in its subsidiary, Inox Wind Infrastructure Services Limited (IWISL), primarily for development of power evacuation infrastructure, for long term working capital requirements up to Rs. 290 crore and other general corporate purposes.

IPO Grading – The company has opted not to get its IPO graded by any credit rating agency. SEBI had made IPO grading voluntary in December 2013.

Listing – The shares of the company will get listed on both the exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).


* High Working Capital Requirement – The business, Inox Wind is into, is capital intensive and also requires huge working capital, as manufacturing and maintaining WTGs require huge investments in project sites and equipments etc.

* Limited Diversification – Top 5 customers of the company contributed approximately 85% of its revenues for the nine months ended December 31, 2014, which makes me a little uncomfortable as far as customer diversification is concerned.

* Limited Operating History – Inox Wind got incorporated in April 2009 and since then, the economic growth has been weak and the government policies have not been clear as far as renewable energy business is concerned. So, the conservative investors should wait & watch before they invest with the company.

Financials of the Company

For the financial year ended March 31, 2014, total income of the company was Rs. 1,576.34 crore as against 1,063.63 crore for the year ended March 31, 2013. The company reported profit after tax (PAT) of Rs. 131.46 crore for the financial year ended March 31, 2014 as against 150.42 crore for the financial year ended March 31, 2013.


Note: Figures are in Rs. Crore, except per share data & percentage figures.

For the nine months ended December 31, 2014, its total income has been Rs. 1,794.98 crore and it clocked a net profit of Rs. 179.31 crore, resulting in a net profit margin of 9.99%. The company reported EBITDA margin of 16.62% for the nine months ended December 31, 2014, 11.71% for the year ended March 31, 2014 and 18.92% the year ended March 31, 2013 respectively.

Total debt/equity ratio of the company stands at 1.25 as on December 31, 2014, whereas long term debt/equity ratio of the company stands at a very comfortable 0.09.

Though the valuations seem to me a bit on a higher side, I think for a growing company with high historical growth, reasonable debt-to-equity ratio, efficient management and a strong promoter group, the valuations Inox is seeking in this offer are reasonably justified. If all goes well for the company, I think its stock price could double from its expected allotment price of approximately Rs. 310 in the next 2-3 years time.

Has India ever lost with Dhoni not out in the second innings?

As India prepares for their quarter final game with Bangladesh tomorrow, and Sri Lanka got destroyed by South Africa today, it took me back to the memories of the India – Sri Lanka final in the last World Cup, and the last game against Zimbabwe, both of which saw a very key innings from MS Dhoni.

Since, Dhoni seems to have such a fantastic temperament while chasing and in general the feeling with the Indian fans is that as long as Dhoni is there any target can be chased, I was wondering what story the numbers tell.

Keep Calm and Trust MS Dhone has the record of all the innings that Dhoni has played, his scores, and the times he has been not out in them. From here you can see that there are 66 instances in all ODIs where Dhoni has remained not out. That he has played 260 games and remained not out 66 times at a percentage of 25% is quite remarkable in itself, but it doesn’t give us the answer to our question.

The next step is to actually go through each of these innings and find out which one India played second, and what was the result of that. From there, you see that there are 40 such innings, so most of his not outs have come in the second innings. Here is the result of all such games.


Rather remarkable to see that out of these 40 games, India has won 38 times, 1 game was tied, and 1 was lost by India, and the one which India lost was a game against Pakistan where everyone else got out.

You can read this number a few different ways, and I leave it to you to read it the way you want to read it, but it does show that you can truly keep calm and trust MS Dhoni.

Investment options for NRIs in USA

Nritk left the following comment on the Suggest a Topic page a few days ago.

NRITK March 8, 2015 at 5:21 pm [edit]

Hi manshu,
Lot has been written and discussed for resident Indians but very less is been discussed about the Investment options for NRIs in and outside India.
There is adequate information is available for investment in India but nothing is precise for investment options for outside India.
For eg. what about the retirement corpus for the NRI who is not planning to come back to India? What are options for him to invest outside India.
I know you would like to target the majority of your followers but I understand that you are also keeping your eyes open across the world so thought might be good if you can also target small but promising fans of your blogs.

Thanks for consideration and look forward something for NRIs.

Best Regards,

If I understand this correctly, then this question really has to be answered in terms of what country do you live in and where can you invest while you’re in that country. Since I’ve lived in the US for a fair bit of time I’ll answer this from the perspective of a NRI in USA; the things that you have to take care of and the places where I used to invest, and you can hopefully draw some parallels from that.


The first thing to keep in mind is taxation, and remember that the US is different from all other countries in the sense that they want to tax all  your income outside the US as well. You have to report your income in India, and then pay tax on it in US as well.

Retirement Accounts: 401k

The next thing to consider is a 401k account. A 401k is a retirement account and the best thing about this is that if you put in some money, your employer has to match that amount up to a certain limit, and that means free money for you. This account also has certain tax benefits that you should take advantage of and it has certain restrictions on withdrawing your money that you should be aware of but all in all this is a great option and something you should look into.

Invest in Real Estate

The third thing that comes to mind is real estate. The interest rates are so low and borrowing so easy that it is a no brainer to buy real estate in the US.

India based ETF

ETFs and Index funds are probably the best way to invest in the asset classes you like if you are in the US.

While in US, I liquidated all of my India stocks in order to simplify my tax situation and also focus on investments from one place. I still wanted exposure to Indian stocks, and in my opinion the best way to do that is to buy the India ETF INDY that is listed in the US and available in your brokerage account.

US Based Index Funds or ETFs

The next thing in my portfolio were stocks and index funds that gave you exposure to American equities. Equities are the best long term assets in terms of returns in my opinion so it is essential to have a healthy sized allocation to equities in your portfolio. For a retail investors, the best way to do this is to buy cheap index funds or ETFs that buy you a basket or large caps. The ETF SPY is a good bet for this.

Debt Funds

There needs to be some exposure to debt funds and an ETF that gives you exposure to debt in the US is a good hedge against the eventuality that the stocks market goes down which is likely to happen many times over in your investing career.

Stay away from NRE Fixed Deposits

These are some investing ideas that I could think of when it comes to investing in the US as an NRI. There is one specific thing that I think US based NRIs (who don’t wish to return or use money in India) should avoid investing in and that is opening a fixed deposit in a NRE account.

There are two reasons for this. The first one is that the Rupee has traditionally depreciated against the USD and that means when you covert those Rupees into Dollars you will get less than what you put in there. There has been no change in the economies of these two countries, and I think it is fair to assume that this depreciation is going to continue in the future also.

The second reason is that the interest from this investment is tax free in India but is still taxable in the US and that reduces the potential return from this asset for you. So, in case you are never going to use this money in India, I don’t think there is any benefit of having it invested in these type of fixed debt instruments.

Sukanya Samriddhi Yojana – Updated List of Authorised Banks to Open an Account, Specimen Application Form & Passbook

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at

RBI on March 11 issued a Circular to the authorised commercial banks to start observing the rules and regulations of Sukanya Samriddhi Yojana as per the Government of India Notification dated December 2, 2014. This circular has been marked to the Chairman & Managing Directors (CMDs) and Managing Directors (MDs) of some of the commercial banks operating in India.

These banks include most of the public sector banks, including State Bank of India (SBI), Bank of Baroda (BoB) and Punjab National Bank (PNB) and a few private sector banks also, including Axis Bank and ICICI Bank.

RBI has instructed these banks to approach Central Account Section, Reserve Bank of India, Nagpur for necessary arrangements to report Sukanya Samriddhi Account transactions with immediate effect. I think it means the RBI wants these banks to start opening accounts under this scheme without any further delays and the subscribers will not have to wait more to open their accounts. They can now approach these authorised banks to open an account.

Though it is still not clear if only these banks would act as the agency banks to open accounts under this scheme or some other banks would also join in, but it seems the following 28 banks would definitely be among all those banks authorised to open Sukanya Samriddhi Accounts (SSA).

Updated List of Banks to Open Sukanya Samriddhi Yojana Accounts

  • State Bank of India (SBI)
  • State Bank of Patiala (SBP)
  • State Bank of Bikaner & Jaipur (SBBJ)
  • State Bank of Travancore (SBT)
  • State Bank of Hyderabad (SBH)
  • State Bank of Mysore (SBM)
  • Allahabad Bank
  • Andhra Bank
  • Axis Bank
  • Bank of Baroda (BoB)
  • Bank of India (BoI) – Branches; Contact – 022-40919191 / 1800 220 229
  • Bank of Maharashtra (BoM)
  • Canara Bank
  • Central Bank of India (CBI)
  • Corporation Bank
  • Dena Bank
  • ICICI Bank
  • IDBI Bank
  • Indian Bank
  • Indian Overseas Bank (IOB)
  • Oriental Bank of Commerce (OBC)
  • Punjab National Bank (PNB) – Website Link; Contact – 011-25744370
  • Punjab & Sind Bank (PSB)
  • Syndicate Bank
  • UCO Bank
  • Union Bank of India
  • United Bank of India
  • Vijaya Bank

RBI also issued a specimen of application form and the passbook for opening an account under this scheme. Unlike the post office application form, this application form would be applicable just for this scheme only.

Here you have the specimen of the application form which the authorised banks/post offices will be using for opening Sukanya Samriddhi Accounts – Application Form


Also, here you have the specimen of the passbook which the authorised banks/post offices will be issuing to the parents/legal guardian of the girl child – Passbook

You can also refer to the following posts for the complete details about this scheme:

Sukanya Samriddhi Yojana – Tax-Free Small Savings Scheme for a Girl Child

Sukanya Samriddhi Yojana – Application Form & List of Banks to Open an Account

Sukanya Samriddhi Yojana – Calculating Maturity Value after 21 Years

Sukanya Samriddhi Yojana – Sample Filled Application Form

If any of you have anything to share or ask about this scheme, please let us know.

NTPC Bonus Debentures Issue – Record Date March 23

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at

On Thursday, NTPC announced March 23rd as the record date for its debenture issue. NTPC will be issuing these debentures to all its shareholders in the ratio of 1:1, which means a shareholder will get one debenture of face value Rs. 12.50 for every one equity share of Rs. 10 each held in the company on the record date. The share price of the company was up 6% in Thursday’s trading session before finally getting closed 3.87% higher at Rs. 159.70.

The company announced its plans to issue such debentures last year on December 23rd. After the shareholders’ approval to issue these bonus debentures, the ministry of corporate affairs (MCA) on Wednesday approved NTPC’s plan to reward its shareholders by issuing these bonus debentures.

Features of NTPC’s Debentures

Coupon Rate – Though its coupon rate has not been disclosed as yet, it will be 50 basis points or 0.50% higher than the average 10-year government security (G-Sec) rate. e.g. If the average G-Sec rate is 7.7%, the debenture holder will get 8.2% interest each year for the next 10 years.

Maturity Period – The debentures will be issued for a duration of 10 years, but will be redeemed at the end of 8th, 9th and 10th year in the ratio of 20% (or Rs. 2.50 per debenture), 40% (or Rs. 5 per debenture) and 40% (or Rs. 5 per debenture) respectively.

Nature of Debentures – These debentures will be secured, non-cumulative, non-convertible, redeemable and taxable as per the tax slab of the investor.

Listing – The debentures will be listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to provide flexibility to its investors to monetize their holding at any point of time during its duration of 10 years.

Benefits of Issuing Bonus Debentures to Shareholders

Why NTPC is issuing these debentures and not paying dividend or issuing bonus shares instead? I think there are multiple reasons for that. Here are some of those reasons:

To Avoid Dividend Distribution Tax – Paying dividend attracts paying dividend distribution tax (DDT) to the government, whereas issuing debentures does not attract any such tax to the issuer. So, I think in order to avoid paying DDT, NTPC is issuing these debentures. I wonder why all listed companies don’t issue such debentures to avoid DDT.

Update: The company will be required to pay the dividend distribution tax (DDT) as the issuance of debentures will constitute “deemed dividend” as defined in section 2(22)(b) of the Income Tax Act.

No Immediate Cash Outflow – NTPC will be issuing these debentures out of its free cash reserves. But, it does not result in an immediate cash outflow for the company. This issuance will reduce NTPC’s cash reserves and an equivalent amount of liability will get created on the liability side of its balance sheet without affecting its cash balance on the assets side.

Cheaper Mode of Loan – NTPC will be issuing these debentures at an approximate rate of 8.2%, which is still below the average rate at which the company borrows money from the capital markets. As the 10-year G-Sec itself is yielding 7.72%, I think 8.2% is still quite cheaper for NTPC.

Interest Amount as an Expense – NTPC will be paying annual interest on these debentures, which the company will show as an expense in its income statements. This way the company will show a lower profit and thereby its tax outgo will also reduce.

Investor Loyalty – An investor, who gets such add-on securities issued by a company without any additional investment, would hold on to its shares for a longer tenure in the hope of more such issuances. So, this way NTPC will be able to attract more equity investors.

Investor Benefit – Such debentures are good for the shareholders as it is very difficult for them to have a direct exposure to such high grade papers from corporate like NTPC. Last year, NTPC issued tax-free bonds at 8.93% rate of interest. The issue received a bumper response as it got oversubscribed on the first day itself.

Should You Buy NTPC’s Shares Now?

So, should you, as an investor, buy shares of NTPC in the hopes of getting these debentures and try to make a quick profit? The answer is Yes, as well as No.

Yes, for those investors who want to hold on to the shares of NTPC for at least one year, this issuance of debentures is of great value. Without spending a single rupee, the investor will be getting these debentures and also the interest income every year.

No, for those investors who want to make a super quick profit thinking that the equity market is inefficient and there is a scope of arbitrage here. The stock has already run up by Rs. 10-15 in the anticipation of this issuance of debentures and I think it should fall by at least Rs. 10 in a day or two before its Record Date of March 23.

Moreover, as the company will be required to pay dividend distribution tax (DDT) on the total amount it will be using from its free cash reserves for issuing these debentures, it seems that there is no real benefit for the investors. In fact, this way the company is getting used by the government to fund its fiscal deficit gap.

So, only if you believe that NTPC is a good company fundamentally, there is a value in its share price and also want to hold on to its shares for more than one year, then you should buy its shares to get these debentures allotted. Otherwise, avoid buying it now.

Weekend links – March 14 2015

Let’s start this week with a topic that has been much discussed recently, and I really liked this contrast of how the discourse of rape is in India versus elsewhere in the world. How the west deals with rape?

The current government seems to be active on many fronts, and taking actions where the previous one was sleeping. An interesting piece on how India targets Maoist Jungle Stronghold to Win Mining Riches

Curiosity is as important as intelligence when it comes to your development as a person.

3-D printing has always been of interest to me so to see this really weird 3-D printed brick that can cool your house really made my day. The article has some information on how a similar device was used to cool houses in the olden days and it was quite a good read.

I was recently checking on air ticket prices, and found out that it is cheaper to fly to Bangkok from Hyderabad than it is to go to Assam. Visa hassles are the one thing that deter me from traveling abroad so it was good to get a list of these countries that have visa on arrival for Indians.

Saudi Arabia has become the world’s biggest arms importer, and guesss who they have edged out?

Great, great article on not only how there could be life but more than that on how they were able to detect such a thing in the first place. Why the warm ocean on the moon of this Saturn could be perfect for life?

Enjoy your weekend!

Atal Pension Yojana – Government Guaranteed Pension Scheme for the Unorganised Sector

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at

Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

Pradhan Mantri Suraksha Bima Yojana (PMSBY)

88% of India’s total labour force of 47.29 crore belongs to the unorganised sector, in which the workers do not have any formal provision of getting a regular pension payment on retirement. Moreover, due to increasing labour wages and better medical facilities, these people also face a risk of increasing longevity. So, this work force would require some kind of assured income guarantee to sustain itself in the coming years.

Launching Atal Pension Yojana (APY) from June 1, 2015

To encourage workers in the unorganised sector to voluntarily save for their retirement, the government of India will be launching a new scheme, called Atal Pension Yojana (APY), from 1st June, 2015. Finance Minister Arun Jaitley announced this scheme in his budget speech on February 28th.

This scheme will replace the UPA government’s Swavalamban Yojana – NPS Lite and will be administered by the Pension Fund Regulatory and Development Authority (PFRDA). The benefits of this scheme in terms of fixed pension will be guaranteed by the government and the government will also make contribution to these accounts on behalf of its subscribers.

Under this scheme, a subscriber would receive a minimum fixed pension of Rs. 1,000 per month and in multiples of Rs. 1,000 per month thereafter, up to a maximum of Rs. 5,000 per month, depending on the subscriber’s contribution, which itself would vary on the age of joining this scheme.

The minimum age of joining this scheme is 18 years and maximum age is 40 years. Pension payment will start at the age of 60 years. Therefore, minimum period of contribution by the subscriber under APY would be 20 years or more.

The Central Government would also co-contribute 50% of the subscriber’s contribution or Rs. 1000 per annum, whichever is lower, to each eligible subscriber account, for a period of 5 years, i.e., from 2015-16 to 2019-20, who join the NPS before 31st December, 2015 and who are not income tax payers. The existing subscribers of Swavalamban Scheme would be automatically migrated to APY, unless they opt out.

Who is eligible for Atal Pension Yojana?

Any Citizen of India, aged between 18 years and 40 years, who has his/her savings bank account opened and also possesses a mobile number, would be eligible to subscribe to this scheme.

Government Funding – Indian Government would provide (i) fixed pension guarantee for the subscribers; (ii) would co-contribute 50% of the subscriber contribution or Rs. 1,000 per annum, whichever is lower, to eligible subscribers; and (iii) would also reimburse the promotional and development activities including incentive to the contribution collection agencies to encourage people to join the APY.

Who is eligible for Government Co-Contribution in Atal Pension Yojana?

Subscribers of this scheme, who are not covered under any other statutory social security scheme and are not income tax payers, would be eligible for the government’s co-contribution of up to Rs. 1,000 per annum.

Social Security Schemes which are not eligible for Government Co-Contribution

  • Employees’ Provident Fund (EPF) & Miscellaneous Provision Act, 1952
  • The Coal Mines Provident Fund and Miscellaneous Provision Act, 1948
  • Assam Tea PlantationProvident Fund and Miscellaneous Provision, 1955
  • Seamens’ Provident Fund Act, 1966
  • Jammu Kashmir Employees’ Provident Fund & Miscellaneous Provision Act, 1961
  • Any other statutory social security scheme

Minimum/Maximum Pension Payable – This scheme will pay a minimum pension of Rs. 1,000 per month and a maximum pension of Rs. 5,000 per month, depending on the subscriber’s own contribution per month.

Minimum/Maximum Period of Contribution – As the minimum age of joining APY is 18 years and maximum age is 40 years, minimum period of contribution by the subscriber under this scheme would be 20 years and maximum period of contribution would be 42 years.

Atal Pension Yojana – Contribution Period, Contribution Levels, Fixed Monthly Pension and Return of Corpus to the Nominees of Subscribers

Picture 3

Internal Rate of Return (IRR) – Thanks to the government funding of Rs. 1,000 per annum per subscriber account for 5 years, your account would generate an IRR of approximately 0.66% per month or 8% per annum. This pension amount per month is fixed and the government has made it clear that if the actual returns on the pension contributions are higher than the assumed returns, such excess return will be credited to the subscribers’ accounts, resulting in enhanced pension payment to the subscribers.

Minimum Contribution – A subscriber aged 18 years will have to contribute a minimum of Rs. 42 per month in order to get Rs. 1,000 pension per month starting 60 years of age. For a 40 years old subscriber, his/her minimum contribution would be Rs. 291 per month. The contribution levels would vary and would be low if subscriber joins early and increase if he joins late.

Maximum Contribution – A subscriber aged 40 years will have to contribute Rs. 1,454 per month in order to get Rs. 5,000 pension per month starting 60 years of age. For a 18 years old subscriber, his/her contribution for Rs. 5,000 monthly pension would be Rs. 210 per month.

Can I increase or decrease my monthly contribution for higher or lower pension amount?

The subscribers can opt to decrease or increase pension amount during the course of accumulation phase, as per the available monthly pension amounts. However, the switching option shall be provided only once in a year during the month of April.

What will happen if sufficient amount is not maintained in the savings bank account for contribution on the due date?

Non-maintenance of required balance in the savings bank account for contribution on the specified date will be considered as default. Banks are required to collect additional amount for delayed payments, such amount will vary from minimum Re. 1 to Rs. 10 per month as shown below:

(i) Re. 1 per month for contribution upto Rs. 100 per month

(ii) Rs. 2 per month for contribution upto Rs. 101 to 500 per month

(iii) Rs. 5 per month for contribution between Rs. 501 to 1,000 per month

(iv) Rs. 10 per month for contribution beyond Rs. 1,001 per month.

Discontinuation of payments of contribution amount shall lead to following:

After 6 months account will be frozen.

After 12 months account will be deactivated.

After 24 months account will be closed.

Subscriber should ensure that the Bank account to be funded enough for auto debit of contribution amount. The fixed amount of interest/penalty will remain as part of the pension corpus of the subscriber.

Post-Retirement Rate of Return – Considering a retirement corpus of Rs. 1.7 lakh and monthly pension of Rs. 1,000, this scheme is going to generate a return of 0.59% per month or 7.1% per annum for its subscribers. I think this return is also on a lower side.

Nomination Facility – This scheme will also provide the nomination facility to its subscribers. In case of the subscriber’s death after attaining 60 years of age, the whole corpus generating the pension income to the subscriber would be returned back to the nominee of the subscriber. In case of untimely death of the subscriber before 60 years of age, the balance would be returned back to the nominee of the subscriber.

Where to open APY Accounts – You need to approach points of presence (PoPs) and aggregators under existing Swavalamban Scheme. These agencies would enrol you through architecture of National Pension System (NPS).

Points of Presence & Aggregators

Application Form – Here you have the links to the application form for subscribing to Atal Pension Yojana – Application Form in EnglishApplication Form in Hindi

I think a subscriber should opt for a minimum monthly contribution of around Rs. 167 or so, which would make it approximately Rs. 2,000 annual contribution. 50% of Rs. 2,000 i.e. Rs. 1,000 would be contributed by the government as well. So, the subscriber will get the maximum benefit of government funding.

As mentioned above, the scheme would start from June 1, 2015. So, interested people will have to wait till then to open an account. If you have any other query regarding this scheme, please share it here.

Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

Pradhan Mantri Suraksha Bima Yojana (PMSBY)

Application Form in English

Application Form in Hindi

Sukanya Samriddhi Yojana – Sample Filled Application Form

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at

I have already posted three articles for Sukanya Samriddhi Yojana and the queries regarding this scheme are not showing any signs of tiredness. People have been asking all kind of queries regarding various features of this scheme and sharing all kind of experiences here on these posts. The biggest problem they are facing is to find out which bank branches are opening this account and accepting deposits from the general public. Banks are showing their inability to open these accounts as they do not have any clue about the account opening process.

I also got a few comments in which people wanted me to post a duly filled application form so that they can also easily fill the application form for themselves. So, here you have the sample of a duly filled application form:




The application form is fairly simple and you can fill it in less than two minutes. Also, I have filled this application form to the best of my knowledge. So, if any of you find any discrepancy in it, please point it out to me and I’ll rectify it as soon as possible.

Please don’t forget to carry the necessary documents to open this account, which are as under:

* Birth Certificate of the Girl Child

* Identity Proof or Aadhaar Card of the Parent/Legal Guardian

* Residence Proof or Aadhaar Card of the Parent/Legal Guardian

* 2 Photographs of the Depositor/Parent/Legal Guardian

Much has already been mentioned about this scheme in my earlier posts, so I’ll wrap it up here. If you have any query regarding this scheme or any of its features, please let me know.

Application Form for Sukanya Samriddhi Yojana

List of authorised commercial banks where you can get this account opened

Calculating Maturity Value of SSA