Pradhan Mantri Vaya Vandana Yojana rate of return reduced to 7.4%, scheme extended until March 2023. Recent meetings held after Budget 2020 are indicating that the interest rates on small saving schemes are going to be reduced from April 2020. Moreover, PM Vaya Vandana Yojana is unlikely to be continued after 31st March 2020. Consequently, senior citizens can invest in Small Saving schemes which will give them security after retirement.
Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a pension plan for senior citizens managed and operated by Life Insurance Corporation (LIC). The scheme provides for an assured return of 8% percent per annum payable monthly (equivalent to 8.3% per annum) for 10 years. However, the subscriber can opt for monthly/quarterly/ half-yearly or yearly payment of the pension.
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Benefits of Pradhan Mantri Vaya Vandana Yojana
Here are some of the key advantages provided to the applicants under Pradhan Mantri Vaya Vandana Yojana-
- The scheme furnishes the pensioner with 8.00% returns p.a payable monthly for 10 years
- Taxes like Service tax or GST are exempted from PMVVY
- 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
- 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
- In case of emergency, loan up to 75% of 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.
- In case the pensioner enrolled dies unfortunately, the purchase price is paid to the nominee
Eligibility Criteria for PMVVY
There are certain eligibility conditions to apply for Pradhan Mantri Vaya Vandana Yojana:
- The applicant should be at least 60 years of age (completed) while entering the scheme
- There is no maximum age of entering into the policy
- Must be a citizen of India
- Minimum policy term- 10 years
Documents Required for the Scheme
Given below are necessary documents required to be submitted by the applicant before enrolling into 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 the Scheme
The scheme requires certain steps which must be followed to get enrolled and obtain maximum benefits from the plan-
Offline Process:
- 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, to any LIC branch
Online Process:
- Visit the LIC website
- Click on “Products”
- Look for “Pension Plans” and proceed
- Fill the application form available under “Buy Policies”
- Submit the form and the required documents for further process
Pradhan Mantri Vaya Vandana Yojana- Modes of Payment
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
Scheme Validity
As per the announcement made in the Budget 2018, the scheme will remain open for subscription till 31st March 2020. The scheme can be purchased offline as well as online through the website of the LIC.
Maximum Investment Under the Scheme
- As per the latest government notification, the subscriber can invest up to Rs.15 lakhs 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 lakhs in the scheme separately.
- The minimum investment in the scheme to avail Rs.1000 per month is Rs.1.5 lakh.
Returns under PMVVY
Pradhan Mantri Vaya Vandana Yojana (PMVVY) provides a government return of 8% per. In case you subscribe for monthly pension scheme, the 8% annual interest is equivalent to 8.3%. 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 interest generated by the LIC and the assured returns of 8% will be borne by the Government of India. The central government will pay the differential amount to LIC as a subsidy.
Pradhan Mantri Vaya Vandana Yojana- Pension Policy
- The minimum pension assured under the scheme is Rs.1000 per month which can go upto 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 purchaser 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.
Loans under Pradhan Mantri Vaya Vandana Yojana
The 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
Pradhan Mantri Vaya Vandana Yojana- Premature Exit
- 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.

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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.
PMVVY- Exclusion
In case the pensioner commits suicide, no exclusion shall be projected and full Purchase price remains payable.