Friday, May 3, 2019

Pradhan Mantri Vaya Vandana Yojana (PMVVY) Scheme

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Pradhan Mantri Vaya Vandana Yojana (PMVVY) Scheme is one of the few good investment schemes for senior citizens with a different pension payout options. This scheme is available with LIC and can be applied online or at one of their offices.

Eligibility:
An individual of the age of 60 years or more may open the PMVVY Scheme account. 

Interest Rate:
Currently, Pradhan Mantri Vaya Vandana Yojana Scheme offers an interest rate of 8.3% for yearly interest payout, 8.13% for half yearly interest payout, 8.050% for quaterly interest payout and 8% for monthly interest payout.

Maturity Period:
Maturity period of PMVVY Scheme is 10 years. On death of the pensioner during the policy term of 10 years, the amount shall be refunded to the beneficiary. The scheme allows premature exit during the policy term under exceptional circumstances like the Pensioner requiring money for the treatment of any critical/terminal illness of self or spouse. The Surrender Value payable in such cases shall be 98% of Purchase Price.

Maximum Limit:
Minimum pension amount is Rs 1000 per month or Rs 12000 per year and maximum pension amount is Rs 10000 per month or Rs 120000 per year. Government of India in the Budget Speech of 2018-19 has announced the enhancement of maximum limit under Pradhan Mantri Vaya Vandana Yojana to Rs. 15 lakhs per senior citizen. The period of sale for this scheme has also been extended upto 31st March, 2020. 

Purchase Price:
The scheme can be purchased by payment of a lump sum Purchase Price. The pensioner has an option to choose either the amount of pension or the Purchase Price.

The maximum Purchase Price under different modes of pension will be as under:
Yearly: Rs. 14,44,783
Half Yearly: Rs. 14,76,015
Quarterly: Rs. 14,90,683
Monthly Rs. 15,00,000

The Purchase Price to be charged shall be rounded to nearest rupee. 

Tax Implications:
There is no tax benefit available on the amount invested. Further, the pension received will be fully taxable in the hands of the individual. The government, however, has exempted PMVVY from TDS.

This investment scheme is highly recommended for senior citizens. Banks are offering fairly low interest rates these days. This scheme is more secured and offers high interest rate with different interest payout options. None of the banks are offering such a high interest rate and none of them are as safe as this scheme from LIC which is backed by government. Senior citizens should definitely invest the maximum amount of Rs 15 Lakhs in this scheme. However, do read the post on Senior Citizens Savings Scheme which offers higher interest rate and offers tax benefit!

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