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Ref. No. KLI/22-23/E-BB/492
Pradhan Mantri Vaya Vandana Yojana is a type of pension scheme announced by the Government of India for senior citizens above 60 years.
The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a crucial financial initiative by the Government of India aimed at providing social security and financial stability to senior citizens. Launched in 2017, the scheme has undergone several iterations to address the evolving needs of the elderly population. The latest version, PMVVY 2023, continues to offer a secure investment avenue for senior citizens while adapting to the changing economic landscape.
This scheme aims to offer financial support to senior citizens by providing them with regular pensions when there is a fall in interest rates. The plan was started from 4th May 2017 to 31st March 2020, which is now further extended up to 31st March 2023.
Now that you know what is Pradhan Mantri Vaya Vandana Yojana, let us dig deeper to understand the PMVVY scheme details.
Following are the benefits of the Pradhan Mantri Vaya Vandana Yojana that contribute to the well-being of our senior citizens.
Before applying for the PMVVY scheme, you need to check the following eligibility criteria:
Here are the necessary documents one must submit before enrolling on Pradhan Mantri Vaya Vandana Yojana:
In the event of the imposition of Statutory Taxes by the Indian Government or any other constitutional tax authority in India, policyholders will adhere to the relevant tax laws and applicable tax rates. However, for the computation of benefits payable under the PMVVY scheme, the taxed amount will not be considered.
While PMVVY is intended as a long-term investment, certain conditions may arise that necessitate a premature exit. Policyholders can consider opting out of the scheme under the following circumstances:
In the event of a critical illness affecting the policyholder or their spouse, a premature exit may be considered to meet the high medical expenses.
The demise of the policyholder or their spouse can lead to a premature exit from the scheme, and the accumulated corpus is typically paid to the nominee or legal heirs.
Unforeseen financial difficulties may prompt individuals to exit the scheme early to access the accumulated funds.
While the PMVVY scheme allows for premature exits under specific conditions, policyholders need to be aware of the potential implications:
Exiting the scheme prematurely may result in a reduced payout compared to the original maturity value. This is because the interest rate applied to calculate the surrender value may be lower than the guaranteed rate promised under the scheme.
PMVVY offers a fixed interest rate for the entire policy term, providing a stable income source for retirees. Premature exit may result in the loss of this guaranteed income for the remaining policy term.
Exiting the PMVVY scheme prematurely can have a significant impact on the overall financial planning of retirees. It is crucial for individuals to carefully assess their financial situation and explore alternative solutions before making a decision.
Consider a senior citizen, Mr Sharma, aged 65, who invests ₹10 lakh in the scheme. The chosen payout frequency determines the pension rates and is subject to change based on prevailing market conditions.
Mr. Sharma invests ₹10 lakh in the PMVVY scheme.
The applicable pension rate for a monthly payout is, for instance, 7.4% per annum.
Monthly Pension = Purchase Price * Pension Rate / 12
Monthly Pension = ₹10,00,000 * 7.4% / 12 = ₹6,167
Therefore, Mr Sharma will receive a monthly pension of ₹6,167 in this scenario.
Let us consider the same investment amount of ₹10 lakh.
The pension rate for an annual payout might be 7.6% per annum.
Annual Pension = Purchase Price * Pension Rate
Annual Pension = ₹10,00,000 * 7.6% = ₹76,000
In this case, Mr Sharma would receive an annual pension of ₹76,000.
One can apply for Pradhan Mantri Vaya Vandana Yojana online and offline. To apply for this scheme, you need to follow the below-mentioned steps:
Under the Pradhan Mantri Vaya Vandana Yojana, the pension can be made monthly, quarterly, half-yearly or annually according to the policyholder’s preference. The payment for the retirement can be made via Aadhaar Enabled Payment System or National Electronics Fund Transfer (NEFT).
Under the PMVVY scheme, the policyholder can invest in an amount of up to ₹1.5 lakhs. This limit applies to the primary investor. To avail the return of ₹1,000 per month from the scheme, you must have a minimum investment of ₹1.5 lakhs.
PMVVY is a risk-free investment option for senior citizens above the age of 60 years. The pension from this scheme is a regular source of income to support the financial needs of retired individuals. However, one must have sufficient liquid funds to invest in this scheme.
1
The application process for PMVVY involves the following steps:
2
The Pradhan Mantri Vaya Vandana Yojana can typically be invested in through the following modes:
Offline Mode: Visit the nearest LIC branch, fill out the application form, and submit the required documents along with the premium amount through cheque or demand draft.
Online Mode: Some insurance companies may provide online application facilities through their official websites. In such cases, you can fill out the form online, upload the necessary documents, and make the premium payment electronically.
Pension Payment Modes: The Pradhan Mantri Vaya Vandana Yojana allows policyholders to receive their pension on a monthly, quarterly, half-yearly, or annual basis, depending on their personal choice.
3
Yes, PMVVY 2023 offers tax benefits. The pension income is taxable as per the income tax slab of the policyholder. However, the premium paid for the policy is eligible for a deduction under Section 80C of the Income Tax Act, subject to the overall limit prescribed. Policyholders are advised to consult with a tax advisor for personalized guidance on tax implications.
4
The scheme has a policy term of 10 years. During this period, policyholders receive regular pension payments. The policyholder can choose the frequency of the pension payments, which can be monthly, quarterly, half-yearly, or yearly.
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Ref. No. KLI/22-23/E-BB/2435