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Pradhan Mantri Vaya Vandana Yojana: Secure Your Golden Years

Created on 14 Mar 2023

Wraps up in 13 Min

Read by 3.7k people

Updated on 20 May 2023

Picture this: You've worked hard all your life, saved up for retirement, and are now ready to enjoy your golden years. However, you realize that your retirement savings are insufficient to support your lifestyle and care for your medical expenses. The thought of financial instability is daunting, and you start to worry about your future.

If you can relate to this scenario, Pradhan Mantri Vaya Vandana Yojana (PMVVY) could answer your worries. PMVVY is a government-backed pension scheme designed specifically for senior citizens, providing a regular income stream to support your financial needs in your golden years.

Whether planning for retirement or looking for a secure way to manage your finances, Pradhan Mantri Vaya Vandana Yojana is a smart investment choice. Don't let financial instability hold you back from enjoying your golden years. 

Get ready to explore the depths of Pradhan Mantri Vaya Vandana Yojana with us as we deep dive into everything you need to know about this great scheme! So, if you're a senior citizen looking for a reliable source of income in your retirement years, keep reading to find out more about PMVVY.

What is Pradhan Mantri Vaya Vandana Yojana?

PMVVY is an insurance-cum-pension scheme provided by the Life Insurance Corporation (LIC) of India and backed by the government. It offers guaranteed pension payouts for 10 years at an attractive interest rate of 7.4% per annum. The scheme is designed to provide senior citizens with a stable source of income to support their financial needs during their golden years.

And, the cherry on top? PMVVY is available for investment until March 31, 2023, so you still have time to invest and secure your future!

Features & Benefits of Pradhan Mantri Vaya Vandana Yojana

Introducing Pradhan Mantri Vaya Vandana Yojana - an investment scheme specifically designed for senior citizens of Indian origin who are 60 years and above. With a maximum investment of ₹15 lakh, this scheme offers an impressive interest rate of 7.4% per annum, significantly higher than the interest rate of fixed deposit accounts offered by banks and non-banking financial companies in India.

But that's not all! There are a host of other features and benefits that make PM Vaya Vandana Yojana an attractive investment option for senior citizens. Here are some key highlights that you should know before signing up:

1. Maturity Tenor: The assured rate of interest is paid during the overall policy term of 10 years for purchases made till March 31, 2023.

2. Mode and Quantum of Pension Payment: You can choose to receive your pension monthly, quarterly, half-yearly, or yearly for a period of 10 years from the date of purchase of the policy. The amount of pension you receive will depend on the purchase price and mode of payment you choose.

3. Loan Benefits: After completing three years from the date of purchase, you can get up to 75% of the deposit as a loan amount. The applicable interest rate for the loan sanctioned till April 30, 2022, is 9.5% per annum.

4. Claiming Funds: In case of unfortunate circumstances, such as the pensioner's death, the nominee must submit a discharge form with the original policy document, proof of title, and proof of death to the corporation within 90 days. The corporation processes all claim payments through NEFT or an Aadhaar-enabled payment system, ensuring a hassle-free and convenient experience for policyholders. However, please note that in case of surrender or death during the policy tenure, the outstanding loan amount and interest will be deducted from the policy money.

5. Premature Withdrawal: In exceptional circumstances, the pensioner can opt for premature exit from the scheme by submitting the discharge form, the original policy document, and proof of medical treatment of self or spouse. The pensioner will receive 98% of the purchase price.

6. Maturity Benefit: After the completion of the 10-year term period, the pensioner can opt for a full withdrawal by submitting the discharge form along with the original policy document. The pensioner will receive the full purchase price along with the final pension instalment.

7. Nomination: The policyholder can nominate a person to whom the money secured by the policy shall be paid in case of their unfortunate demise. If the nominee is a minor, an assignee (a person to whom a right or liability is legally transferred) can also be elected to receive the money.

8. Grievance Redressal Mechanism: In case of any grievances related to their PM Vaya Vandana Yojana account, customers can visit the LIC branch office or the official website of the LIC. Alternatively, they can email co_crmgrv@licindia.com or call toll-free numbers - 155255 or 1800 425 4732.

9. Insurance Cover: The scheme also provides life insurance cover, and in the event of the policyholder's death during the policy term, the purchase price, along with the final pension instalment, will be paid to the nominee.

Pradhan Mantri Vaya Vandana Yojana Eligibility

Are you ready to secure your future with the Pradhan Mantri Vaya Vandana Yojana? Here's what you should know about the eligibility criteria before enrolling in this scheme.

1. Age: The scheme is available to Indian citizens aged 60 years and above.

2. Investment Limit: While the scheme has a maximum investment limit of ₹1,500,000, the minimum amount required to invest is ₹1,50,000.

3. Pension Amount: The minimum pension amount payable under the scheme is ₹1,000 per month, while the maximum pension amount is ₹9,250 per month, as per the LIC sales brochure. However, it's important to note that the maximum pension amount has been mentioned as ₹10,000 per month as per the official website of myscheme.gov.in. 

4. Family Size: The pension amount selected by an individual should be in line with their family size, which includes a spouse and dependents, such as an unmarried daughter and an unemployed son, with a maximum age limit of up to 25 years of age.

5. Premium Payment: The payment of the purchase price (premium) can be made in a lump sum or through regular monthly, quarterly, half-yearly, or yearly instalments.

6. Surrender: The policy can be surrendered before the completion of the tenure in exceptional circumstances, such as the critical illness of self or spouse, but the surrender value payable would be 98% of the purchase price.

7. Nomination: The policyholder can nominate a person who will receive the money secured by the policy in case of their death. Assignees can also be elected to receive the money if the nominee is a minor.

8. Medical Examination: The policyholder does not need to undergo any medical examination to avail of this scheme.

9. Tax Benefits: The pension income received under this scheme is taxable, and TDS will be deducted at the prevailing rates. However, the purchase price (premium) paid is eligible for a tax deduction under Section 80C of the Income Tax Act.

Purchase Price and Pension Options under Pradhan Mantri Vaya Vandana Yojana: Choosing the Right Payment Mode

Thinking about investing in the Pradhan Mantri Vaya Vandana Yojana scheme but don't know where to start? Well, fret not! We've got you covered.

First things first, to enrol in this scheme, you need to deposit the purchase price in a lump sum. But wait, did you know that you have the option to choose the periodic payout mode too? Yes, you read that right! You can opt for monthly, quarterly, half-yearly, or yearly payouts.

Now, the million-dollar question - how much should you invest? Well, the answer to that depends on how much periodic payout you want to receive. You can either select the purchase price or the pension amount while opting for this plan.

But hold on, there's more! Before you go ahead and invest, make sure you're aware of the maximum and minimum purchase prices applicable for each periodic payout. This will help you better understand the scheme and make an informed decision.

Pradhan Mantri Vaya Vandana Yojana with these maximum purchase prices under various modes of pension!

Mode of Pension

Maximum Purchase Price

Corresponding Pension Amount

Monthly

₹15,00,000

₹9250/month

Quarterly

₹14,89,933

₹27,750/quarter

Half-Yearly

₹14,76,064

₹55,500/half-yearly

Yearly

₹14,49086

₹1,11,000/year

The minimum purchase price for your desired pension payout mode in the PMVVY scheme!

Mode of Pension

Minimum Purchase Price

Corresponding Pension Amount

Monthly

₹1,62,162

₹1,000/month

Quarterly

₹1,61,074

₹3,000/quarter

Half-Yearly

₹1,59,574

₹6,000/half-yearly

Yearly

₹1,56,658

₹12,000/year

Pradhan Mantri Vaya Vandana Yojana Example

Let's say Mr Kumar, a retired government employee, has just invested a lump sum of ₹10,00,000 in the Pradhan Mantri Vaya Vandana Yojana scheme. Mr. Kumar is 65 years old and has opted for the monthly payout mode.

Here's a breakdown of the benefits Mr Kumar will receive under this scheme:

Pension with Assurance: The pension amount will be calculated on the purchase price, which is Rs. 10 lakh, at a fixed rate of 7.4% per annum for the next 10 years. Since Mr. Kumar has opted for the monthly payout mode, he will receive his interest income every month.

Therefore, the pension amount Mr Kumar will receive every month is as follows:
(₹10,00,000 x 7.4%) = ₹74,000/12 = ₹6,166

So, regardless of market fluctuations, Mr Kumar will receive ₹6,166 every month for the next 10 years or until he survives within this tenure.

  • Maturity Benefit: After completing the 10-year policy term, Mr Kumar will receive the entire purchase price of ₹10,00,000.
  • Death Benefit: In the unfortunate event of Mr Kumar's demise within the policy term, his nominee will receive the entire purchase price of ₹10,00,000. as a death benefit.
  • Surrender Value: In case Mr Kumar requires funds in a lump sum at anytime during the policy term, he can opt for surrendering the policy. As per the scheme's rules, he will receive 98% of his purchase price as a surrender value. So, if Mr Kumar decides to surrender his policy after 5 years, he will receive a surrender value of ₹9,80,000 lakh.
  • Loan Facility: If Mr Kumar needs funds for an emergency like medical treatment or other purposes, he can avail of a loan against his policy. After 3 years of successfully running the policy, he can avail of 75% of the purchase price, which is ₹7,50,000, as a loan.

So, this scheme provides Mr Kumar with a fixed monthly pension for the next 10 years, a lump sum payment at the end of the policy term, and various other benefits like death benefits, surrender value, and loan facility.

Application process of Pradhan Mantri Vaya Vandana Yojana

If you're looking to invest in the Pradhan Mantri Vaya Vandana Yojana, you'll be happy to know that you have two options - online and offline modes. Let's explore how you can proceed with online & offline applications:

Pradhan Mantri Vaya Vandana Yojana Offline Application

If you prefer to apply for the Pradhan Mantri Vaya Vandana Yojana scheme offline, it's a straightforward process. Here are the steps you need to follow:

  • Locate the nearest LIC branch: You can visit the nearest Life Insurance Corporation of India branch and enquire about the PMVVY scheme.
  • Get the application form: You will receive an application form for PMVVY. Fill in all the necessary details carefully.
  • Attach the necessary documents: Along with the filled application form, you will need to attach the required documents, such as your identity proof, address proof, and age proof.
  • Submit the application form: After filling up the application form and attaching the necessary documents, submit it to the LIC representative at the branch.
  • Pay the premium: You will have to pay the premium amount through a cheque, demand draft, or any other mode of payment as per LIC's guidelines.
  • Receive the policy bond: Once the LIC representative verifies the application and the documents submitted, you will receive the policy bond, which proves that you have invested in the PMVVY scheme.

By following these simple steps, you can purchase the PMVVY scheme offline and ensure a secure retirement for yourself.

Pradhan Mantri Vaya Vandana Yojana Online Application

Are you ready to purchase the Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme but don't have the time to visit the LIC office? Be at ease Fret not, as you can now apply for PMVVY online. Here's how:

  • Visit the Life Insurance Corporation of India (LIC) official website at www.licindia.in.
  • Click on the 'Buy Policy Online' tab.
  • Choose the 'Pradhan Mantri Vaya Vandana Yojana' option from the list of available policies.
  • Fill out the application form with all the necessary details, including personal information, nominee details, and pension amount.
  • Upload the necessary documents, including proof of identity, age, and address.
  • Choose the payment mode and make the payment online.
  • After the successful payment, you will receive an acknowledgement receipt with your policy number.
  • You can download and print your policy documents from the website.

That's it! You can purchase PMVVY online and secure your financial future with just a few clicks. So why wait? Head over to the LIC website and get started today!

Documents required for Pradhan Mantri Vaya Vandana Yojana

Before applying for the PMVVY scheme, you must gather a few important documents. Here's a handy checklist to help you out:

1. Age proof: You must submit a document verifying your age. This can be a birth certificate, passport, driving license, or other valid government-issued ID. 

2. Address proof: You'll also need to provide a document that shows your current address. This can be a utility bill, bank statement, or any other official document.

3. Bank account details: To receive your pension payments, you'll need to provide your bank account details. Ensure you have your account number, IFSC code, and other relevant information.

4. Photographs: You'll need to submit a few recent passport-size photographs along with your application.

5. Cancelled cheque: You'll need to submit a cancelled cheque to verify your bank account details.

6. KYC documents: Finally, you must complete your KYC (know your customer) verification. This involves submitting a copy of your PAN card and Aadhaar card.

Once you've gathered these documents, you'll be ready to apply for the PMVVY scheme. Don't forget to double-check that you have all the required documents before you submit your application!

Taxation on Pradhan Mantri Vaya Vandana Yojana

When it comes to the Pradhan Mantri Vaya Vandana Yojana scheme, you might be wondering about taxes. Let's take a look at what you need to know:

First things first, the pension you receive from this scheme is taxable. Yep, you heard that right - the government will want a piece of that pie!

However, there is some good news too. The tax you'll have to pay on your pension income is based on your income tax slab. So, if you're in a lower tax bracket, you'll end up paying less tax on your pension.

Another thing to keep in mind is that if you surrender your policy before the completion of the 10-year tenure, you'll be subject to some taxes. Specifically, you'll have to pay tax on the surrender value of your policy.

On the other hand, if you complete the 10-year tenure and receive the maturity benefit of Rs. 9 lakh, you won't have to pay any tax on that amount. That's right - it's completely tax-free! Finally, if you're the nominee of the policy and receive the death benefit, you won't have to pay any tax on that amount either.

So, there you have it - a quick overview of the taxes on the Pradhan Mantri Vaya Vandana Yojana scheme. Remember these points, and you'll be better prepared come tax season.

Premature exit from the Pradhan Mantri Vaya Vandana Yojana scheme

Planning for retirement is essential, but life is unpredictable, and we may need to withdraw our savings early. Similarly, if you have invested in the Pradhan Mantri Vaya Vandana Yojana scheme but need to exit early due to unforeseen circumstances, you may want to know how to proceed.

The Pradhan Mantri Vaya Vandana Yojana scheme allows for premature exits under certain circumstances. If you need to exit the scheme before the completion of the policy term, you will need to understand the process and the terms and conditions.

Here are some points to consider regarding the premature exit from the Pradhan Mantri Vaya Vandana Yojana scheme:

1. Surrender Value:  If you want to exit the scheme before the completion of the policy term, you can do so by surrendering your policy. The amount you will receive will be the Surrender Value, which is 98% of the Purchase Price. For example, if your Purchase Price was ₹10,00,000, you will receive ₹9,80,000Lakh as the Surrender Value.

2. Medical Emergency: If you need to exit the scheme early due to a medical emergency, you can submit a request with the necessary medical documents. In this case, you will receive the Surrender Value.

3. Death: In case of the policyholder's death, the nominee will receive the entire purchase price as the death benefit.

4. Loan: If you have taken a loan against the policy, the outstanding loan amount will be deducted from the Surrender Value.

It is important to note that if you choose to exit the scheme early, you will receive only the Surrender Value, and the interest earned on your investment will be forfeited. Therefore, weighing the pros and cons before deciding on the premature exit from the Pradhan Mantri Vaya Vandana Yojana scheme is advisable.

Risk Associate with Pradhan Mantri Vaya Vandana Yojana

Investing in the Pradhan Mantri Vaya Vandana Yojana scheme is a smart move for individuals planning for their retirement. However, it's essential to be aware of the potential risks that come with any investment. Here are some potential pitfalls to keep in mind:

1. Interest Rate Risk: The interest rate risk is a crucial aspect of the PMVVY scheme, as the returns are fixed and guaranteed. This means that if the interest rates rise after you invest in the scheme, you will not be able to take advantage of the higher interest rates. Additionally, if the interest rates fall, your returns will remain the same, and you may lose out on potential gains.

2. Liquidity Risk: The PMVVY scheme has a lock-in period of ten years, which means that you cannot withdraw your investment before the completion of the policy term. If you need money urgently and do not have any other source of funds, you may face liquidity problems.

3. Inflation Risk: Inflation is a significant risk associated with any investment. The PMVVY scheme offers guaranteed returns, but it does not take into account the impact of inflation. This means that the value of your investment may decrease over time due to the impact of inflation.

4. Default Risk: The PMVVY scheme is a government-backed scheme, which means that the risk of default is relatively low. However, there is still a chance that the government may not be able to meet its obligations, and you may not receive the returns promised under the scheme.

While these risks may seem daunting, it's essential to keep in mind that the Pradhan Mantri Vaya Vandana Yojana scheme is a relatively safe investment option. As long as you invest wisely and keep an eye on the potential risks, you can enjoy the benefits of a secure and stable retirement income.

The Bottom Line

The Pradhan Mantri Vaya Vandana Yojana is a great scheme for senior citizens who want to secure their financial future. This scheme is worth considering with guaranteed returns, flexible payment options, and various benefits such as the death benefit and loan facility. So, if you are a senior citizen looking for a safe and stable investment option, the PMVVY is an excellent choice. Remember, it's never too late to start securing your financial future, and this scheme is the perfect way to do it!

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Divyanshu did his post-graduation in Financial Economics, and that's when he realized that writing about finance interests him the most. He has been writing finance content for two years and considers himself a coherent and confident writer. As a Finance content writer, he reads a lot about the subject and makes sure he is up to date with the latest updates in the market. Besides that, he is passionate about fitness and works hard to maintain a healthy lifestyle.

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