How APY guarantees the pension
Pension is funded by your contributions + interest accrued. If contributions fall short, the Government of India guarantees the pension; surplus, if any, is paid back to the subscriber. On death of the subscriber, the spouse receives the same pension; after the spouse, the corpus is paid to the nominee.
Tax benefit
Contributions are deductible under Section 80CCD(1) up to the overall ₹1.5 lakh limit of Section 80C.