Pradhan Mantri Vaya Vandana Yojana (PMVVY) ★ Excellent Pension Plan for Senior Citizens

Pradhan Mantri Vaya Vandana Yojana or PMVVY was first announced in Budget 2017 and launched on May 4, 2017. The scheme was open till March 31, 2020 but has now been extended to March 31, 2023 [Budget 2020]. In this post we review the new Pradhan Mantri Vaya Vandana Yojana and check if senior citizens should invest in this?

Pradhan Mantri Vaya Vandana Yojana Terms and Conditions

  • Minimum age for investment is 60 years
  • There is no Maximum age for entry
  • It gives return of 7.40% compounded monthly. [This interest is applicable for purchase in FY 2021-22 i.e. till March 31, 2022]
  • You can choose to receive pension monthly, quarterly, half yearly or annually
  • The maturity period is 10 years. At the end of maturity period the investment amount. would be returned.
  • The pension payment shall be through ECS/NEFT only
  • On death of the policy holder, the premium is returned back to the nominee
  • The plan is available till March 31, 2023
  • The premium is exempted from GST
  • LIC Plan Number: 842
  • UIN: 512G336V01

Padhan Mantri Vaya Vandana Yojana Interest Rate 2021

LIC has published the Padhan Mantri Vaya Vandana Yojana Interest Rate for FY 2021-22 as 7.4%. Essentially there has been no change in the interest rate from last year. This interest would be applicable for purchase until March 31, 2022.

pradhan mantri vaya vandana yojana interest rate 2021
pradhan mantri vaya vandana yojana interest rate 2021

PMVVY Purchase Price and Pension

The table below gives the minimum/maximum purchase price and the respective pension that one would receive for 10 years. In case of PMVVY, the minimum and maximum investment is set up on the amount of pension. If you look in the table below the minimum pension that can be given in monthly option is Rs 1,000 and you have to invest Rs 162,162. Similarly the maximum monthly pension you could get with Pradhan Mantri Vaya Vandana Yojana is Rs 9.250. For that you need to invest Rs 15 Lakh.

PMVVY Investment/Pension LimitMonthlyQuarterlyHalf YearlyYearly
Minimum InvestmentPension Amount1,0003,0006,00012,000
Investment Required162,162161,074159,574156,658
Maximum InvestmentPension Amount9,25027,75055,500111,000
Investment Required15,00,00014,89,93314,76,06414,49,086
PMVVY Purchase Price and Pension – April 1, 2021 to March 31, 2022

The maximum investment limit is Rs 15 Lakh and the minimum limit is Rs 156,658. You can buy anything in between (including both amounts). The maximum limit above is for one family. Family here means spouse and the dependents.

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Is Padhan Mantri Vaya Vandana Yojana Taxable?

People often get confused – Padhan Mantri Vaya Vandana Yojana Taxable? The answer is Yes. The pension received is added to your annual income and taxed based on your income tax slab.

PMVVY Surrender Value

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 on PMVVY

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. For the loan sanctioned till 30th April, 2021, the applicable interest rate is 9.5% p.a. for the entire term of the loan. Loan interest will be recovered from pension amount payable under the policy.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)
Pradhan Mantri Vaya Vandana Yojana (PMVVY)

PMVVY Free look-up period

If a policyholder is not satisfied with the “Terms and Conditions” of the policy, he/she may return the policy to the Corporation within 15 days (30 days if this policy is purchased online) from the date of receipt of the policy stating the reason of objections.
The amount to be refunded within free look period shall be the Purchase Price deposited by the policyholder after deducting the charges for Stamp duty and pension paid, if any.

Padhan Mantri Vaya Vandana Yojana Pros and Cons

The good

  1. This is a simple product with a guaranteed return
  2. The scheme is guaranteed by Government of India and is managed by LIC. So it has safety of highest level.
  3. As the economy develops the interest rates come down. Hence it’s a good product to lock 7.4% interest rates for 10 years. However banks too offer fixed deposit tenure for 10 years.
  4. The policy can also be surrendered before maturity for treatment of illness.
  5. 75% Loan against policy can be a good thing for emergency liquidity needs.
  6. No GST on the premium paid for PMVVY unlike other pension products.

The Bad

  1. The pension you receive is taxable. This would be added to your income and taxed at your marginal tax rate, similar to fixed deposits. 
  2. The amount is locked-in for 10 years, so the money may not be available if required urgently (other than in case of illness)
  3. The pension is not adjusted to inflation. Assuming inflation at 7%, the purchasing power of Rs 5,000 would reduce to Rs 2,500 in 10 Years.

How to Buy Pradhan Mantri Vaya Vandana Yojana?

You can buy Pradhan Mantri Vaya Vandana Yojana online through LIC website or contact LIC agent to buy it offline.

How PMVVY competes against other Investments? pradhan mantri vaya vandana yojana vs jeevan shanti

There are few investments for senior citizens which they might evaluate before committing to PMVVY.

Pradhan Mantri Vaya Vandana Yojana vs SCSS

Senior Citizens Saving Scheme another very popular scheme for senior citizens offers 7.4% interest which is payable quarterly. This means SCSS interest is slightly lower than PMVVY as PMVVY pays the same 7.4% monthly. The other issue is with SCSS you can lock-in your investment for 5 years only. One advantage of SCSS is it’s eligible for tax benefit u/s 80C.

Senior Citizens’ Savings Scheme: An Excellent Investment

Senior Citizens’ Savings Scheme or SCSS is an excellent investment for senior citizens for regular income and tax saving u/s 80C. It is 100% safe as its backed bu Government of India, the interest paid is generally higher than bank fixed deposits and the investment is eligible for tax saving u/s 80C. We explain the eligibility, process and do’s & don’ts of SCSS in this post.

Pradhan Mantri Vaya Vandana Yojana vs fixed deposit

Bank Fixed Deposit is again a very popular investment option for senior citizens for regular income. As of today very few small financial banks are offering more than 7.4% and none of the traditional banks are going above 7%.

  • Jana Small Finance Bank offers 8.01% for 1188 Days – 1191 Days deposits
  • Jana Small Finance Bank offers 7.75% for offers 8.01% for 1188 Days – 1191 Days deposits
  • Suryoday Small Finance Bank has 7.75% for 5 years deposit

None of traditional banks offer interest rate of 7.4% on any tenure. Even small banks are offering so in limited tenures.

Get Highest Fixed Deposit Interest Rates

Fixed Deposit with Banks is one of the most popular and convenient investment option. To help you choose the best, we compare the interest rates on fixed deposit across all major 48 banks in India including government, private, foreign and small financial banks in India every month. This may prove to be quite handy for you in choose the Best Bank FD scheme.

PMVVY vs NCDs/Bonds

There are new issues of NCDs which offer interest higher interest in the range of 8% to 10%. However there is some credit risk involved and you should only invest in these if you understand and can take such risks with your retirement money.

You can also buy bonds from stock exchange through your demat account. However, 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.

PMVVY vs Debt Mutual Fund

Regular income can be generated by investing in Debt Mutual Funds and then using SWP (Systematic Withdrawal Plan). The returns are similar to fixed deposits of banks. It’s more suited if you are in highest tax bracket.

PMVVY vs Tax Free Bonds

PFC, HUDCO, NABARD, IRFC etc had issued tax free bonds in the past and are available on exchanges with yields in the range of 4% – 5%. 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.

How to generate Regular Monthly Income?

There can be several situations when we look for regular income. This is especially true for people after retirement without any pension. Also there would be new entrepreneurs who need regular income until their start-up stabilises. We tell you 13 investments which can generate regular income for you along with their pros and cons.

Should you invest in PMVVY?

In today’s scenario, there are almost NO investments like FD or Debt Funds, which competes with Pradhan Mantri Vaya Vandana Yojana. in terms of interest rates offered (and safety of investment). You may wait for next few months to see if there is any uptick in interest rates (which I don’t see going as high as 7.4%) from Banks in FDs as the interest rate of 7.4% on PMVVY would be valid till March 31, 2022. Our recommendation is PMVVY is a good and simple product especially for aged people looking for regular income after retirement and can be invested for regular income (albeit small and may cover just a part of your Monthly expenses).

Pradhan Mantri Vaya Vandana Yojana FAQs

✅ How can I buy Pradhan Mantri Vaya Vandana Yojana?

PMVVY is sold by LIC. It can be bought online through LIC’s website. In case you want to buy it offline, you can approach a LIC agent or LIC office.

✅ What is maximum I can invest in Pradhan Mantri Vaya Vandana Yojana?

You can invest maximum of Rs 15 Lakh in PMVVY. It will give a pension of Rs 9,250 every month. This limit is on family level (includes your spouse and any dependents).

✅ Can I take Loan on Pradhan Mantri Vaya Vandana Yojana?

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. For the loan sanctioned till 30th April, 2021, the applicable interest rate is 9.5% p.a. for the entire term of the loan. Loan interest will be recovered from pension amount payable under the policy.

✅ Can I take surrender Pradhan Mantri Vaya Vandana Yojana?

The PMVVY 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.

✅ is pradhan mantri vaya vandana yojana eligible for 80c?

No investment in Pradhan Mantri Vaya Vandana Yojana is not eligible for any tax benefit. There is misconception about it offering tax benefit u/s 80C. For tax benefit and similar Interest rate you can look for Senior Citizens Saving Scheme.

✅ is pradhan mantri vaya vandana yojana extended?

Yes the scheme has been extended till March 31, 2023. Howe ver the interest rate may change at start of every financial year. For investment till March 31, 2022, the interest rate is 7.4%.

✅ how to open pradhan mantri vaya vandana yojana?

You can buy Pradhan Mantri Vaya Vandana Yojana online through LIC website or contact LIC agent to buy it offline.

3 thoughts on “Pradhan Mantri Vaya Vandana Yojana (PMVVY) ★ Excellent Pension Plan for Senior Citizens”

  1. Does it mean that if I buy this PMVVY policy any time till 31st march 2022, I will be entitled for a fixed 7.4% interest, payable every month, for the entire duration of the policy tenure. And the repayment of principal amount at 100% value after the end of the 10 years tenure.

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