Under the Jan-Dhan Yojana, an old age pension paid by the government…

Under the Jan-Dhan Yojana, an old age pension paid by the government is credited to a villager’s bank account. In national income accounting, this pension is a:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Transfer payment

A pension is paid by the government without any work done in return in that year. Such a payment is a transfer payment. Households receive it, and it is added to calculate their Personal Income.

Option (1) Factor income earned for work done — Incorrect. Factor income is paid for a service of labour, land or capital in production.

Option (2) Transfer payment — Correct. A pension is paid without any work done in return, so it is a transfer payment.

Option (3) Part of gross domestic capital formation — Incorrect. Capital formation is addition to capital goods, such as machines and buildings.

Option (4) Net indirect tax — Incorrect. Indirect taxes are paid to the government on goods, not paid by it to people.

This question uses Rural Development and National Income Accounting together.

NCERT (2026-27): “… To improve the situation, In recent years, all the adults are encouraged to open bank accounts as a part of a scheme known as Jan-Dhan Yojana. Those bank account holders can get Rs. 1-2 lakh accidental insurance coverage and overdraft facilities for Rs. 10,000 and get their wages if they get any government-related jobs and works under MNREGA (now known as Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission [Gramin] [VB-G RAM G]); old age pension and other social security payments of the government are transferred to bank accounts. There is no need to keep minimum bank balance. This has led to more than 50 crore people opening bank accounts; indirectly it has promoted thrift habit and efficient allocation of financial resources particularly in rural areas. …”

National Income Accounting: “… The households receive transfer payments from government and firms (pensions, scholarship, prizes, for example) which have to be added to calculate the Personal Income of the households. …”