What Is PM Vaya Vandana Yojana?

The Government of India has introduced the new pension scheme called PM Vaya Vandana Yojana (PMVVY) after the success of Varishtha Pension Bima Yojana 2003 and Varishtha Pension Bima Yojana 2014. The main goal of the scheme is to provide the elderly with a regular pension during a time of falling interest rates so that can secure their future. PMVVY can be activated from 4 May 2017 to 31 March 2020. LIC has been chosen to implement the scheme and issue policies. Let us discuss about PMVVY in detail. This scheme has now been further extended for a period of 3 years and the time period for the policy activation is 3 years i.e. upto March 2023.

Eligibility of Pradhan Mantri Vaya Vandana Yojana

The following conditions must be fulfilled by a person in order to become eligible for availing the benefits of Pradhan Mantri Vaya Vandana Yojana:

• Minimum Age: The age of the person must be of 60 years or above.
• Maximum Age: There is no maximum age limit for availing of the policy
• Duration: The duration of the policy is 10 years.
• Maximum investment amount: Minimum investment required is ₹15 lakhs per person.
• Minimum Pension: The minimum pension required is ₹1000 per month and cannot exceed ₹10000 per month. Also, the minimum pension is ₹3000 quarterly, ₹6000 half-yearly and ₹12000 yearly or annually.
• Maximum Pension Amount: The maximum pension that can be earned is ₹10000 monthly, ₹30000 quarterly, ₹60000 half-yearly and ₹120000 annually.

When deciding the maximum pension amount, the complete family of the pensioner is considered that comprises of the beneficiary, his/ her dependents and spouse.

Benefits of Pradhan Mantri Vaya Vandana Yojana

The Pradhan Mantri Vaya Vandana Yojana, which is a pension scheme launched by the Government of India in favor of senior citizens is managed and controlled by Life Insurance Corporation of India (LIC).

• Interest Rate: This scheme aims to provide fixed rate of return i.e. 7.4% per annum for monthly scheme, 7.45% scheme for quarterly scheme, 7.52% for half-yearly scheme and 7.66% for the yearly scheme for the current financial year, payable monthly and is exempted from GST (indirect tax) for the entire duration of the scheme i.e. 10 years. The interest rates of the scheme are revised every year and set by the Government of India
• Loan Facility: The pensioner can avail a loan amount which is capped at maximum 75% of the investment after the completion of 3 years of the policy. The interest on the scheme is 10% if a loan is availed and the loan is sanctioned upto 30 April, 2018. This interest is paid semi annually for complete scheme duration.
• Death Benefit: In case of death of the pensioner during the terms of policy i.e. 10 years , the benefit of policy can be availed by the nominee or beneficiary.
• Benefit to Family: The benefits of the policy can be availed by the pensioner, spouse of that persons and the family members dependent on him.
• Maturity benefit: The purchase price and the final pension instalment are paid to the pensioner on completion of the policy.
• Free-Look Period: It is the period in which a policy holder or pensioner can close the scheme if he is not happy with it or do not want to continue further. The free look up period is 15 days in case the policy is bought offline. If the policy is purchased online then the pensioner has an additional time period of 15 days to close the policy which makes it a total 30 days for online purchased policies. Only the stamp charges are deducted and the entire amount paid by the pensioner is paid back to him.

Pension Amount Payment to the Pensioner

The pension must be paid to the pensioner through Aadhaar Enabled Payment System (AEPS) or National Electronics Fund Transfer (NEFT). The first pension transfer must be completed within 1 month, 3 months, 6 months, or 1 year from the date the policy was bought depending on the mode of payment as monthly, quarterly, half-yearly and yearly respectively. Some important points to be known about this scheme are:

• Tax benefits on PMVVY:
  If any Statutory Taxes are imposed by the Government of India or any other constitutional tax Authority of India, the applicable tax rates will be taken into consideration for the calculation of benefits under the PMVVY scheme. The amount of tax paid will not be considered.
• Closure of scheme before maturity:
  The requirement of money for treatment of terminal or critical illness for the policyholder of his/her spouse is the only circumstance where premature exit from the policy is allowed. 98% of the Purchase Price must be paid as the Surrender Value.
• Suicide: If the pensioner commits suicide, the entire purchase price is payable.

Calculation of the Benefits under PMVVY

Let us consider the benefits for a purchase price of ₹156658 under various payment modes. The pension amount for the amount under various modes is as follows:

• Monthly: ₹1044 p.a.
• Quarterly: ₹3153 p.a.
• Half-yearly: ₹6352 p.a.
• Yearly: ₹13003 p.a.

These values are calculated considering the age of pensioner as 60 years and may vary according to the age of the person.

These benefits are for the old scheme. The scheme was modified in March 2020. Let us see the benefits under the modified scheme.

Pension Mode	Minimum Investment Amount	Pension Amount	Maximum Investment Amount	Pension Amount
Monthly	162161	1000	1500000	9250
Quarterly	161074	3000	1489993	27751
Half-yearly	159574	6000	1476064	55500
Yearly	156658	12000	1449086	111000

Note that the pension amount has been calculated on the basis of the maximum and the minimum amounts for various pension modes.

Frequently Asked Questions (FAQs)

Q1. What all documents are needed for the PMVVY?

Solution: The documents needed for applying to PMVVY are PAN Card, Proof of Address (PoA such as Aadhaar, Passport, etc.), and a copy of the Cancelled Cheque leaf or first page of the bank passbook in which the amount is to be credited.

Q2. Can a person avail of any tax benefit on PMVVY?

Solution: Yes, the PMVVY scheme provides for a tax benefit for upto 1,50,000 under Section 80C of the Income Tax Act. Also, the scheme is exempted from GST.\

Q3. What is the eligibility for the PMVVY?

Solution: The main eligibility for the PMVVY is that the person must be an Indian Citizen and a minimum of 60 years of age. There is no maximum age limit.

Q4. Is PMVVY safe investment option?

Solution: As the scheme is completely backed by the government, it is completely safe to invest in PMVVY as compared to other options such as bonds, mutual funds, etc.