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
Sir,
1) Is annuity earned on PMVVY is subject to TDS?
2) Is the final payment after the term of 10 years (Purchase price+Annuity for last year) is taxable?
If yes, is the whole amount taxable?
If not then under which sec. of I.T. act it is exempt?
CAN HUF eligible to invest in PMVVY. though a HUF i am a senior citizen. the purpose is to spread the tax evenly between individual and HUF
No... PMVVY is for individuals only
Those Sr Citizen who hav already deposited in pmvvy are feeling cheated after Govt has raised interest rate by 0.4 percent from 1st Oct 2018
प्रधान मंत्री वय वंदना योजना में 8% मिलने वाली ब्याज पूर्णतः taxable है जिनकी आय 20% की स्लैब में है उनको प्राप्त होने वाली ब्याज 7% से काफी कम पड़ेगी. 10 वर्षो बाद जब जमा धन वापस मिलेगा तो उसकी मार्केट वैल्यू काफी कम हो चुकी होगी अतः PMVVY से मिलने वाली ब्याज को लगातार NSC में जमा करते रहें.
इस स्कीम का lock-in पीरियड कम किया जाना चाहिए वृद्धावस्था में 10 वर्षो तक जीने की कोई Guarantee नहीं होती
PMVVY INCOME MUST BE RELIEVED FROM INCOME, ONLY THEN IT WOULD BE BENIFIFIAL TO SR. CITIZENS
PMVVY IS NOT HIGHLY BENEFICIARY UNTIL AND UNLESS INCOME TAX REBATE IS ALLOWED
Agree with you
There must be separate RELIEF of income tax on pension/interest received from PMVVY otherwise it is not a good scheme and may prove a failure in future because in absence of no relief of income tax is not bebeficiary, also your money is blocked for 10 years
In PMVVY if both investor & nominee in some accident or suddenly, no one can claim the invested amount.
There is no benifit of 80C
The interest is taxable, so persons falling in bracket of 20% taxation, the interest income rate goes to very low
Elaborated rules are not notified.
Your money is locked for 10 years at very low profit, you cannot use your money for 10 years.
The Govt should announce more benefit to attract investors as PMVVY offers very poor benefits, and these rules should apply to present and coming investors
The money value after 10 years will reduce considerably
Dear Amit I am a senior citizen. I would like to know if there is any tds on interest earned and also I am already getting old age pension of Rs 2000 per month from government, is investing in pmvvy will cancel my Old Age Pension from government. Please guide me. Thanks.
Yes there would be TDS on PMVVY. No your government pension is independent of PMVVY and would not be impacted in anyway.
Thanks for such a great article.. Column is realy understandable.. Thanks