Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Pradhan Mantri Vaya Vandana Yojana rate of return reduced to 7.4%, scheme extended until March 2023

The Pradhan Mantri Vaya Vandana Yojana scheme provides for an assured return of 7.4% percent per annum payable monthly (equivalent to 7.66% per annum) for 10 years. The PMVVY scheme comes with policy term of 10 years and the maximum investment permitted under the scheme is Rs. 15 lakh. Moreover, the subscriber can opt for monthly/quarterly/ half-yearly or yearly payment of the pension. Read on to find out more about PNVVY scheme.

Benefits of Pradhan Mantri Vaya Vandana Yojana

Here are some of the key advantages provided to the applicants under LIC Pradhan Mantri Vaya Vandana Yojana-

• PMVVY Interest Rate: PMVVY scheme furnishes the pensioner with 7.4% returns p.a. payable monthly for 10 years
• Scheme Validity: The scheme subscription period has been extended by 3 years from FY 2020-21 till 31 March, 2023. The scheme can be purchased offline as well as online through the website of the LIC.
• Maximum Investment: As per the latest government notification, the subscriber can invest up to Rs.15 lakh in the scheme. However, the limit applies only on the investing individual. Therefore, if your spouse is also older than 60 years, she can invest up to Rs. 15 lakh in the scheme separately. Also, the minimum investment in the scheme to avail Rs. 1,000 per month is Rs.1.5 lakh.
• Tax Exemption: Taxes like service tax or GST are exempted from PMVVY
• Pension Payment: Throughout the 10 years period of policy, the pension is payable in arrears at the end of each period. Payments are made monthly/quarterly/half-yearly/yearly whichever is selected by the pensioner
• Death Benefit: In case the pensioner enrolled dies unfortunately during the policy term of 10 years, the purchase price is paid to the nominee/beneficiary
• Maturity Benefit: The entire amount including the purchase price and final pension installment is payable at the end of policy term of 10 years, when the pensioner survives till the end of the policy term
• Loan Facility: In case of emergency, loan up to 75% of the principal price is allowed to be sanctioned after 3 years into the policy. The interest on this loan is recovered from pension installments whereas the loan amount is recovered from claim proceeds
• Premature Exit:98% of purchase price is refunded for treatment in case of medical emergencies/critical illness etc. of self/spouse.
• Free-look Period: In case the policyholder is not satisfied with the terms of the policy, he can surrender the policy within 15 days. The free-look period is 30 days if the policy is purchased online. The purchase price after the deduction of stamp duty and pension paid (if any) will be refunded to the policyholder.

Eligibility Criteria for PMVVY

The eligibility conditions to apply for Pradhan Mantri Vaya Vandana Yojana are as follows:

• The applicant should be at least 60 years of age (completed) while entering the PMVVY scheme
• There is no maximum age of entering into the policy
• Must be a citizen of India
• Minimum policy term – 10 years

• Minimum Pension that is Earned	Maximum Pension that can be Earned
  Rs. 1,000/- per month	Rs. 9,250/- per month
  Rs. 3,000/- per quarter	Rs. 27,750/- per quarter
  Rs. 6,000/- per half-year	Rs. 55,500/- per half-year
  Rs. 12,000/- per year	Rs. 1,11,000/- per year

Note: The entire family is taken into consideration when deciding the maximum pension ceiling. The family under the PMVVY scheme consists of the pensioner, his/her dependents, and spouse.

Documents Required for PMVVY Scheme

Given below are necessary documents required to be submitted by the applicant before enrolling into LIC Pradhan Mantri Vaya Vandana Yojana –

• Aadhaar Card
• Proof of Age
• Proof of Residence
• Passport size photos of the applicant
• Relevant document/declaration to show the retired status of the applicant

Application Process of PMVVY Scheme

The PMVVY scheme requires certain steps which must be followed to get enrolled and obtain maximum benefits from the plan-

Steps to Apply for PMVVY Offline

• Application forms are available in all the LIC branches
• The applicant must fill the form
• Attach all the required documents after self-attesting them
• Submit the form, along with documents, at any LIC branch

Steps to Apply Online for PMVVY

1. Visit the LIC website
2. Click on “Products” and select “Pension Plan”
3. Click on “Pradhan Mantri Vaya Vandana Yojana”
4. Download the “Policy Document”, i.e., Pradhan Mantri Vaya Vandana Yojana new form pdf
5. Fill the application form and submit it along with the required documents for further process

Payment of Purchase Price

PMVVY scheme can be purchased by payment of a lump sum purchase price. The pensioner can either choose the amount of pension or the purchase price. Also, the purchase price is rounded to the nearest rupee when it is being charged.

• The minimum pension assured under the scheme is Rs. 1,000 per month which can go up to Rs.10,000 a month, depending on the principal invested.

Mode of Pension	Minimum Pension	Minimum Investment	Maximum Pension	Maximum Investment
Yearly	12,000	1,44,578	1,20,000	14,45,784
Half-Yearly	6,000	1,47,601	60,000	14,76,014
Quarterly	3,000	1,49,068	30,000	14,90,684
Monthly	1,000	1,50,000	10,000	15,00,000

• As per the scheme, in order to get a minimum pension of Rs. 1,000 per month, one should invest Rs. 1,50,000. Similarly, one can get a pension of Rs. 10,000 a month with investment of Rs.1,50,000.
• Since the policy term is of 10 years, the policy purchaser gets back his principal with the final pension installment on completing 10 years.
• In case of the death of the pensioner before completing 10 years, the principal amount will be credited to the nominated beneficiary’s account.
• Interestingly, the amount of pension is not dependent on the age of the subscriber.

How to Make Payment for Pradhan Mantri Vaya Vandana Yojana

• Payments of pension are made in time periods which is selected by the pensioner while applying for the scheme. These periods are categorised as monthly, quarterly, half-yearly, yearly payments. The modes of pension payment are as follows-
• NEFT
• Aadhaar Enabled Payment System

Returns under PMVVY

• Pradhan Mantri Vaya Vandana Yojana (PMVVY) provides a government return of 4% p.a. payable monthly. In case you subscribe for monthly pension scheme, the 7.4% annual interest is equivalent to 7.66% p.a.
• Since the scheme essentially operates as a pension plan, it does not attract any GST or service charge.
• However, there is no income tax relief for the scheme. The returns are taxable. The difference between the interest generated by the LIC and the assured returns of 4% will be borne by the Government of India. The central government will pay the differential amount to LIC as a subsidy.

Loans under Pradhan Mantri Vaya Vandana Yojana

• PMVVY scheme allows the pensioners registered under the plan to obtain loans in case there is some medical emergency such as critical illness of self or spouse.
• Maximum loan granted: 75% of the purchase price
• Loan can be applied for only after completion of 3 years in the policy
• The interest against loan is recovered from pension amount payable as per the policy and outstanding loan is recovered from the claim proceeds

Premature Exit from PMVVY Scheme

• The Pradhan Mantri Vaya Vandana Yojana (PMVVY) also has provisions for a premature exit on the grounds of critical illness of self or of the spouse.
• In such a case, the policy purchaser will be refunded 98% of the invested principal. However, the remaining 2% will be charged as a premature exit penalty.
• If the policy purchaser commits suicide, 100% of the purchase price will be refunded to the nominee.

Tax Treatment under the Plan

• In case there are any taxes, Statutory Tax or any other tax, imposed by the Government of India or Constitutional Tax Authority of India, charges will be made according to the Tax laws and rate of tax as applicable.
• The tax paid shall not be included in the calculation of overall benefit paid under the pension policy.

Exclusion of PMVVY Scheme

• In case the pensioner commits suicide, no exclusion shall be projected and full purchase price remains payable.

FAQs

Q. What is the surrender value payable in case I make a premature exit from the PMVVY scheme?

Ans. The scheme permits policyholders to take a premature exit/PMVVY premature withdrawal under exceptional circumstances like in case the pensioner requires money for the treatment of any critical/terminal illness of self/spouse. The surrender value payable in such cases shall be 98% of the purchase price.

Q. What is the rate of interest chargeable on a loan on PMVVY scheme?

Ans. The rate of interest to be charged on a loan amount is variable and determined at periodic intervals. Loans sanctioned till 30th April, 2022, under earlier versions of this scheme, the applicable interest rate is 9.5% p.a. for the entire term of the loan.

Q. What is the period for which PMVVY scheme is available for sale?

Ans. The Pradhan Mantri Vaya Vandana Yojana scheme is available for sale up to 31st March, 2023.

Q. Will the interest rate contracted at the time of purchase of the PMVVY policy remain the same for the entire 10 years policy term?

Ans. The PMVVY interest rate contracted at the time of purchase of the policy will remain unchanged for the entire 10 years policy term.

Q. Is there any difference in the guaranteed pension rate if the policy is taken online?

Ans. No, the guaranteed pension rate is similar for offline as well as online mode of sale.

Q. Is PMVVY eligible for deduction under section 80C?

Ans. No, investments in PMVVY are not eligible for tax deductions under section 80C of the Income Tax Act. The returns generated from the scheme shall be taxed at the time of receipt according to the prevailing tax laws and the appropriate tax rate.

Q. Can anyone invest in both PMVVY  as well as SCSS?

Ans. Yes, you can invest up to a maximum of Rs. 15 lakh in each of the saving schemes simultaneously. Therefore, Rs. 30 can be invested in the two schemes cumulatively. Both these investment options are backed-up by the government and offer a substantial return.

Q. Is PMVVY taxable income?

Ans. Yes, the interest that you earn on your PMVVY investment is taxable as per your income tax slab. There are no tax exemptions on this income. However, in case the total interest that you earn in a financial year is less than Rs. 50,000, no (TDS) tax is deducted at source.

Q. Can a policyholder invest in PMVVY multiple times?

Ans. Yes, a policyholder can invest in the PMVVY scheme multiple. However, the total purchase price of an individual under all the policies under this plan should not be more than Rs.15 lakh.

Q. Should I initiate a claim for a return of purchase price under PMVVY?

Ans. No, at the end of the policy term, maturity claims are initiated by LIC on its own. LIC would pay the purchase price long with the final pension installment to the policyholder.