Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023 now came up with five major changes. Pradhan Mantri Vaya Vandana Yojana (PMVVY) is now extended up to 31st March 2023. However, the Government changed certain rules with respect to PMVVY. What are those important 5 changes?
Features and Eligibility of Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023
Let us now discuss about the features and eligibility of Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020- 2023.
Some other features of this product are as below:-
# You can surrender this policy during the policy period under certain exceptional circumstances like pensioner requires money for treatment of any critical/terminal illness of self or spouse. Surrender value payable will be 98% of the purchase price.
# You can avail the loan facility after completion of 3 policy years. The maximum loan payable will be 75% of the purchase price. Interest on the loan will be recovered from the pension amount.
# If the pensioner suicide during the policy period, then his nominee or legal heirs will receive the full purchase price.
# Pension is payable at the end of each period, during the policy term of 10 years, as per the frequency of monthly/ quarterly/ half-yearly/ yearly as chosen by the pensioner at the time of purchase.
# The scheme is exempted from Service Tax/ GST.
# Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme does not provide tax deduction benefit under section 80C of the Income Tax Act. Returns from this scheme will be taxed as per existing tax laws.
# There is no TDS on this product.
# Pensioner have to submit the Life Certificate on yearly basis through online “Jeevan Pramaan” mode. The pension will be issued after the submission of Life Certificate.
Benefits of Pradhan Mantri Vaya Vandana Yojana
The benefits of this plan are as below.
# During the policy period
The pensioner will receive the monthly, quarterly, half-yearly or yearly pension as he has opted during the time of buying.
# Death Benefits
On the death of the pensioner during the policy term, the Purchase Price will be refunded to the nominee (or legal heirs in absence of nominee).
# Maturity Benefits
If the pensioner survives up to the end of the policy term, Purchase Price and final installment of the pension will be paid to the pensioner.
How to buy Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023?
You can buy a PMVVY scheme from LIC. The scheme is available via both offline and online mode. You can visit the nearest LIC branch or log on to the official website of LIC to purchase this annuity scheme. A policyholder has an option to return the policy within 15 days of the purchase. If the policy is purchased online, the free look period is 30 days.
For offline purchase, you can buy through Cheque/DD.
Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023 – 5 Changes you must know
You now understood the features of Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020. Let us now see the changes done to the PMVVY.
# PMVVY now available up to 31st March 2023
Actually PMVVY was closed on 31st March 2020 itself. After that Government not extended the date. Now, they have extended the date up to 31st March 2023. Hence, it is available for the investors up to 31st March 2023.
# Interest Rate for FY 2020-21 reduced
Earlier the interest rate on PMVVY was 8%. However, now for FY 2020-21, Government reduced the interest rate to 7.4%.
# Yearly change in the interest rate
Earlier, it was not such a practice to revise the interest rate of PMVVY on yearly basis. However, now the Government changed this rule. From now onwards, it will be changed on a yearly basis.
Do remember that suppose if you pruchased during the FY 2020-21 then the current 7.4% interest is applicable for you for throughout the 10 years period. The change in interest rate on yearly basis is applicable to the new buyers only.
Hence, existing buyers will enjoy the interest rate for next 10 years which is at the time of purchase.
# Minimum investment required is revised
The minimum investment has also been revised to Rs.1,56,658 for a pension of Rs.12,000/- per annum and Rs.1,62,162/- for getting a minimum pension amount of Rs.1000/- per month under the scheme.
It was earlier Rs.1,44,578 to avail a yearly pension of Rs.12,000 and Rs.1,50,000 for getting a minimum pension amount of Rs.1,000 per month.
It is all because of reduced interest rate from 8% to 7.4%.
# Interest Rate is linked to SCSS and Finance Minister will decide the interest rate
Annual reset of the assured rate of interest with effect from April 1st of the financial year in line with the revised rate of returns of Senior Citizens Saving Scheme (SCSS) up to a ceiling of 7.75% with a fresh appraisal of the scheme on breach of this threshold at any point.
Delegating the authority to Finance Minister to approve the annual reset rate of return at the beginning of every financial year.
Review of Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023
Considering the current trend, even though there are few negatives, but this product is worth to consider for senior citizens.
# No Tax Benefits-I may say this product as one more failure. Senior Citizens desperately looking for tax benefits or tax relief when they receive the pension. However, this product fails to meet that expectation.
# Liquidity-As one grows older, uncertainties related to health or other issues pop up. Hence, one must invest in a highly liquid product. However, in this case, liquidity is available in exceptional cases. Hence, it fails to understand the requirement of senior citizens.
# Inflation– This plan will give you the same equal monthly pension. But who will take care of raising inflation in terms of health issues or the cost of living?
# Maximum Ceiling-The The maximum pension one can avail under this plan is Rs.9,250 a month and the maximum investable amount is Rs.15,00,000. This means that one can’t sustain by depending on this product itself. It is hard for an individual to survive with meager Rs.9,250 per month pension.
# Returns-The only eye-catching in this product is a 7.4% guaranteed pension. But tax and inflation will eat this 7.4% return and in the end, you may have to survive with the negative real return. However, if one compares with FDs, then this product may be eye-catching.
# You can go ahead IF-You can go ahead and invest in this plan IF you are not concerned about your taxation, inflation, or not aware of other products like tax-free bonds or other debt products. Simple, straight forward, backed by Government and managed by LIC are the positives of this product.
# No Age-based purchase-Unlike Jeevan Shanti, which is also LIC’s immediate annuity plan, in this plan the purchase price is fixed. It is not dependent on your age.
Conclusion:-Considering the current falling interest rates and scary debt funds, it is a product made for senior citizens. I suggest you to go ahead and utilize this product to the maximum.
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Susmita
Hello Sir,
1. If I transfer money to my mother’s account and she invest that amount along with additional amount in PMVVY, does this money transfer attract any tax? PMVVY pension amount is taxable that I know, but does this daughter to mother money transfer attract any tax?
2. My mother, a senior citizen, does not have more than 3L income annually, and does not submit IT return. This year if she purchase PMVVY policy, does she need to submit IT return this year? If yes, does she need to continue submitting IT return?
3. If her annual income exceeds 3L but remains under 5L, does she need to submit IT return?
Kindly advice.
Regards
NB: Every time I am submitting comment it disappears after page refresh, and I have to again post it. Kindly look into the matter.
Basavaraj Tonagatti
Dear Susmita,
1) The best option is to have a gift deed between you and your mother (in a plain paper). Once you gift that to her, whatever the tax liability is there, it is on her head. This way, you can reduce the tax liability.
2) and 3) It is better to file ITR.
Susmita
Hello Sir,
Kindly let me know
1 )whether one has to pay GST on PMVVY premium amount?
2) For example if someone wants to buy PMVVY policy of 5lacs, does she need to pay additional GST over this 5lacs?
Regards
Basavaraj Tonagatti
Dear Susmita,
Yes, you have to pay the GST.
Balaji Rajagopal
Basu Sir – Small correction, you have typed NOT instead of NOW in “Let us NOT discuss about the features and eligibility of Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020- 2023.”
Basavaraj Tonagatti
Dear Balaji,
Thanks for the suggestion. Yes, updated.
Vivek Me
Hello,
If i invest in Pradhan Mantri Vaya Vandana Yojana (PMVVY) today (on 21st May 2020), rate of interest will be fixed for complete policy term of 10 years (which is 7.40% for Monthly Pension)?
Please confirm.
Basavaraj Tonagatti
Dear Vivek,
Fixed for you.
Kamal Garg
It means that under PMVVY, you get 7.4% interest and under SCSS, you get 7.75%. Both are fundamentally inadequate and tax inefficient and inflation neutral or negative over an extended time period. Further, since in both the cases, the rate of interest is open to review/change every year, so technically, your ‘investment/contribution’ is tied whereas the returns are not fixed but variable. And in the falling rate scenario, no wonder, interest would drastically reduce over the next many years.
Basavaraj Tonagatti
Dear Kamal,
In current scenario, who is giving you 7.4% and 7.75% (even if we consider the pre-tax)? Above that, they have secured product. Hence, for those who are looking for safety, constant stream of income and best returns in current scenario, these are the best.
Do remember that if you invest today, then your return on investment is fixed.
PRIYAJIT GHOSH
Thanks a the update ?..whether the limit of investment has been extended from earlier 15 lakh or not?
Basavaraj Tonagatti
Dear Priyajit,
It is Rs.15,00,000. There is no change in that.
Vidya
In article you mentioned maximum ceiling is 7.5Lakh right
Basavaraj Tonagatti
Dear Vidya,
Sorry, I forgot to edit. The initial limit when it was launched was Rs.7.5 lakh and later increased to Rs.15 lakh.
PRIYAJIT GHOSH
Thanks for the update..was waiting for it & no wonder u r first one to cover after it got published in financial express. Just one query, r they charging GST on premium unlike erstwhile?
Basavaraj Tonagatti
Dear Priyajit,
NO GST.