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?
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.
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 Limit | Monthly | Quarterly | Half Yearly | Yearly | |
---|---|---|---|---|---|
Minimum Investment | Pension Amount | 1,000 | 3,000 | 6,000 | 12,000 |
Investment Required | 162,162 | 161,074 | 159,574 | 156,658 | |
Maximum Investment | Pension Amount | 9,250 | 27,750 | 55,500 | 111,000 |
Investment Required | 15,00,000 | 14,89,933 | 14,76,064 | 14,49,086 |
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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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.
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. 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.
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.
You can buy Pradhan Mantri Vaya Vandana Yojana online through LIC website or contact LIC agent to buy it offline.
There are few investments for senior citizens which they might evaluate before committing to PMVVY.
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 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.
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%.
None of traditional banks offer interest rate of 7.4% on any tenure. Even small banks are offering so in limited tenures.
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.
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.
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.
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.
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.
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).
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.
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).
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.
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.
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.
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%.
You can buy Pradhan Mantri Vaya Vandana Yojana online through LIC website or contact LIC agent to buy it offline.
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Bank Deposit rates are not correct, please recheck..........
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.
Yes