Pradhan Mantri Vaya Vandana Yojana for Senior Citizen

By :Balwant Jain

With rising costs of living and reducing interest rates for almost last 15 years, senior citizens are hard hit. The fixed deposits rates have come down to around 6-50% to 7 % levels. With almost no chance for the senior citizens to increase their source of income they have only one option i.e. to invest their funds in avenues which bring you better returns than the banks fixed deposits without any risk as to erosion of their capital. The Government from time to time comes with certain schemes to provide reliefs to senior citizens in this respect. One major scheme which the government had introduced in 2004 Senior Citizen Saving Scheme (SCSS). 

The finance minister in his budget speech had announced about a scheme to help the senior citizen. The Life Insurance Corporation of India has launched a scheme to give effect to the announcement made by the finance minister on 4th May May 2017. The scheme name is Pradhan Mantri Vaya Vandana Yojana This scheme is available for a period of one year till 3rd May 2018. This scheme guarantees the senior citizen a guaranteed fixed pension @ 8% for 10 years. This rate of guaranteed pension of 8% offered looks very attractive. This scheme can be purchased online as well as offline. 

Who can open avail this scheme? 

This account can be opened by any Individual only as this scheme comes to you in the form of an annuity policy and an annuity policy can only be purchased by an Individual so the benefit under this scheme can not be availed by an HUF. Since there is limit of upto which an Individual can avail the annuity under this scheme there is naturally limit of amount upto which an individual can invest in the scheme. The ceiling of maximum pension is applicable for a family as a whole meaning there by that the . total amount of pension under all the policies issued to a family under this scheme shall not exceed the maximum pension limit discussed below. The family for this purpose will comprise of pensioner, his/her spouse and dependants.

Amount of annuity available and the purchase price you need to pay

The above schemes helps you to earn a good return on your investment while safeguarding your capital. These also ensure you regular cash flow at regular intervals. This is basically a pension plan with return of capital sum earning you an annuity ranging from Rs. 1000/- per month to Rs. 5000/- per month. Under the PMVYY you have the option to receive the annuity at monthly, quarterly, half yearly or yearly interval. Depending on payment frequency chosen by you, you need to deposit the money with Life Insurance Corporation of India. The table below gives you the amount of money to be deposited and the amount of annuity which you will be entitled to receive.

Pradhan Matri Vaya Vandana Yojana for Senior Citizen
Frequency of payment	Minimum		Maximum
	Purchase Price	Annuity	Purchase price	Annuity
Yearly	1,44,578/-	12,000/-	7,22,892/-	60,000/-
Half-yearly	1,47,601/-	6,000/-	7,38,007/-	30,000/-
Quarterly	1,49,068/-	3,000/-	7,45,342/-	15,000/-
Monthly	1,50,000/-	1,000/-	7,50,000/-	5,000/-

Premature withdrawals and withdrawal on maturity

Under this scheme you are normally not allowed to withdraw the purchase price paid by you before completion of 10 years. However in exceptional circumstances like for treatment of terminal illness or critical illness of the spouse or the self, you are allowed to withdraw the money but you will get only 98% of the purchase price on such surrender. However on completion of the term of 10 years you will get back the full price which is not taxable in your hand at the time of the receipt.

Loan against the purchase price

The scheme provides for the facility to take loans upto 75% of the purchase prices after completion of three years from commencement of the policy. The rate of interest applicable on such loans be declared from time to time and for the current year it is 10% payable half yearly. The amount of interest shall be recovered from the pension amount due to you. The amount of loan if not repaid earlier shall be adjusted against the principal amount payable whether at the time of maturity or at the time of premature withdrawal.

Taxation

Please note that unlike the Senior Citizen Savings Scheme where you get the tax benefit for deposits made in the account, no tax benefits are available at the time of making the investments. Moreover the annuity received is taxable in your hand and is taxed at the slab rate applicable to you.

I am sure this scheme will turn out to be vary good scheme for senior citizen as it offers guaranteed payment @ 8% for next 10 years specially when the interest rates on downslide and the interest may further come down.