PMVVY (Pradhan Mantri Vaya Vandana Yojana) is a new scheme for retired individuals who are aged 60 years or more. Now they have a new investment option to meet their regular income needs. The scheme has started from 4th may and will be available until one year.

What Is PMVVY?

PMVVY is a pension scheme started by the government of India and the amount of investment made in the scheme is termed as ‘Purchase Price’. The pension will begin at the end of the chosen period, i.e. an arrear. The time subjected to the pension is 10 years and the pension (return) is based on the investment done.

How Much Are The Returns?

Many pension plans in India are based on the age, but PMVVY is not based on the age. The retunes under PMVVY ranges from 8-8.3% which is more than any other mode of pension plan. But similar to other plans, the investment amount (purchase price) and the pension amount are capped.

What Are The Limits?

The amount of pension it limited to Rs 60,000 per annum whereas the purchase price is limited to Rs 7,50,000. The family will comprise of the pensioner, his/ her spouse and the dependents. The modes of payment can me monthly, quarterly, half yearly or yearly. The payment methods will be done by NEFT or Aadhaar Enabled Payment System.

How Is The Pension Amount Calculated?

For every Rs 1,000, it is Rs 83 per annum. So in one invests Rs 5 lakh, the pension amounts will Rs 41,500 annually. So if one needs the monthly pension of Rs 3,000, one need to invest Rs 4.5 lakh. The maximum amount for investing is Rs 7.5 lakh and pension for ten years will be Rs 5,000.

What Will Happen On The Maturity?

Even the pensioner survives the date of maturity of 10 years; the purchase price along with the final pension installment is refunded to the individual. If during the policy terms of 10 years, the person dies, only the purchase price is refunded to the beneficiary.

What If Someone Wants Early Exit?

In case if the money is required for any crucial treatment during any critical situation, only 98% of the purchase price will be refunded.

Where To Buy And What Are The Tax Benefits?

LIC of India has been made the sole provider for this scheme. It is available both offline and online from the LIC website. Talking about the tax benefits, there are no tax benefits for the amount invested, the pension that will be received, will be fully taxable in the hands of the individual in the year of receipt. But the government has exempted PMVVY from service tax.

It is also said that the limit of SCSS (Senior Citizen Savings Scheme) if once gets exhausted; some portion of one’s retirement kitty may be considered in PMVVY but only after evaluating the tax position of the person, as to keep the tax liability under control.

Are There Any Alternative?

Talking about the 10 year bank deposits for senior citizens, the interest rate is 6.5%-7.25%.  Post office MIS for 5 years is offering 7.6% with the maximum deposit limit of Rs 4.5 lakh (Rs 9 lakh in joint account). The 5 year senior citizen savings scheme is giving interest rate of 8.4% and Rs 15 lakh can be deposited. The SCSS is also available with income tax benefit under section 80C.

Conclusion

PMVVY though is not tax free and doesn’t even allow tax benefits, but it offers higher returns as compared to other FDs and is also a sovereign guaranteed investment.  Not a single investment plan is there that allows the investors to enjoy all superior powers of taxability, liquidity, safety and higher returns, so one has to decide according to his/her needs before investing in a plan.

Apart form this, the interest rate offered by PMVVY are higher and its locks the funds for a longer period. It assures fixed income for the next ten years. The problem is, if in between the time, the interest rates took a u-turn, the investor will be in trouble. So it’s advised to the investor to only invest that particular amount of money that he/she can keep parked for a long time.

Tags: Investment OptionLICpension schemePMVVYRetirementSCSS