Our Prime Minister had announced a new Pension Scheme for Senior Citizens offering 8% returns for 10 years in December 2016. The proposal was also stated in Budget 2017. This has finally been launched on May 4, 2017 with the name of Pradhan Mantri Vaya Vandana Yojana 2017-18 (PMVVY).
In this post we review PMVVY and check if senior citizens should invest into it?
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The table below gives the minimum/maximum purchase price and the respective pension that one would receive for 10 years. The maximum investment limit was revised in Budget 2018 from Rs 7.5 Lakh to Rs 15 Lakh.
You can buy anything in between (including both amounts).
The maximum limit above is for one family. Family here means spouse and the dependents.
Also Read: Best Tax Saving Investments u/s 80C
The policy can be surrendered under exceptional circumstances like money required for the treatment of any critical/terminal illness of self or spouse . The Surrender Value payable shall be 98% of Purchase Price.
Loan facility is available after completion of 3 policy years. The maximum loan that can be granted shall be 75% of the Purchase Price. The rate of interest to be charged for loan amount would be determined from time to time by LIC. Loan interest will be recovered from pension amount payable under the policy.
Also Read: 13 Investments to Generate Regular Income
Also Read: 25 Tax Free Incomes & Investments in India
You can buy Pradhan Mantri Vaya Vandana Yojana online through LIC website.
There are few investments which still offer more than 8% returns for senior citizens. You must look into the same before committing your funds to Pradhan Mantri Vaya Vandana Yojana.
1. Deutsche Bank (5 years), IDFC Bank (366 days), Lakshmi Vilas Bank (750 days) offers 8.0% for senior citizens fixed deposit.
The added advantage is you can withdraw the amount anytime.
Also Read: Best Interest Rate on Senior Citizens Bank Fixed Deposits
2. NCDs/Bonds listed on Stock exchange. Some examples:
The problem is the liquidity for these bonds are low and hence it’s difficult to buy/sell. However you can buy easily when they are issued.
Also Read: Latest NCD open for subscription
3. Tax Free Bonds listed on Stock Exchanges
PFC, HUDCO, NABARD, IRFC etc had issued tax free bonds in the past and are available on exchanges with yields in the range of 6.44%. The bonds have residual maturity of 10 to 15 years. As the interest received is tax free, these turn out to be better investments for senior citizens in highest tax bracket. The interest payout is annual. Also all the companies are backed by Government of India and also AAA rated – hence safe for investment.
4. Senior Citizens Saving Scheme
Senior Citizens Saving Scheme offers 8.3% interest which is payable quarterly. This too is backed by Government of India and so is safe. The problem is you can lock-in your amount only for 5 years.
Also Read: All about Senior Citizens’ Savings Scheme
5. DHFL Aashray Deposit Plus
DHFL is housing finance company and is rated AAA. It offers 8.45% to senior citizens for fixed deposit up to 10 years. You can choose to get interest monthly, quarterly, half-yearly or yearly.
6. Debt Mutual Funds
Regular income can be generated by investing and then using SWP (Systematic Withdrawal Plan) to generate regular income. This is usually more tax efficient than fixed deposits. Also the returns are closer to bank fixed deposits.
Read: How SWP in Debt Mutual Funds is better than Fixed Deposit for Regular Income?
I think Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a good and simple product especially for aged people looking for regular income after retirement. But there are other investments as listed above which offer more returns. You must evaluate those before locking your money in the pension plan.
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View Comments
PMVVJ by LIC Purchased Money increased from Rs 7.5 lakhs to Rs 30.00 lakhs from 4th May, 2018 per family ?
Its 15 Lakh increased from 7.5 lakhs earlier
Pradhan Mantri VVJ managed by LIC
Has the maximum purchase price raised from 7.5 lakhs to Rs 30.00 lakhs from 4th May 2018 per family ?
Rs 15 lakhs each from husband and wife ?
would like to invest monthly Rs.30000 till the end of the scheme PMVVY.Is it possible or only one time investment is allowed
I think you can invest every month but you'll have to go through all paperwork etc every month.
Dear Amit
My wife has invested in Jeevan Varishta pension scheme in 2015 and getting Rs.60000 anually.
Now I am interested to take PMVVY . is it permissible as it is with in the family.
Yes both are two different plans so you can take it
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Dear sir
Thanks for ur valuable articles..
I want to know that my parents who are senior citizen can invest in pradhanmatri vaya vandna yojna seprately.
I mean my mother can invest for her pension and my father too can invest for his pension..or there is any rule that only one person either husband or wife can invest.
Plz clear my doubt.
Thnks
Prabha
Ceiling of maximum pension is for a family as a whole i.e. total amount of pension under all the policies allowed to a family under this plan shall not exceed the maximum pension limit. The family for this purpose will comprise of pensioner, his/her spouse and dependents.
So both can invest separately but the total pension paid to both combined cannot exceed Rs 60,000 annually.
Amit g
It means total investment limit for a family is 750000. If My mother invests in PMVVY 750000 and gets 5000 monthly pension in that case my father cant invest 7.5 lacs for his pension in PMVVY additionly?
true
Is this plan eligible for sec 80 (C) or not/
no
I am a family pensioner of Government of India. I want to know that whether the pension received from PMVVY scheme of LIC will be treated as interest on my investment or second pension in my case, as the family pension rules state that any another pension will disqualify me from getting the existing family pension.
PMVVY is an annuity plan. Though named pension its NOT that but a product from LIC which would have NO impact on your existing family pension. So ahead with PMVVY, in case it suits you.
Dear Amit, i am a sr .citizen If we added the arear of Pension to the present income, it will comes in the range of 10% S.charge.Can we reduce income by deducting previous year arear income with depositing the tax
Yes you can do so - Just check how to calculate tax on arrears?