Pradhan Mantri Vaya Vandana Yojana (PMVVY)

India is home to a large population of senior citizens with an estimated 149 million elderly individuals, many of whom struggle to make ends meet due to the lack of steady income sources after retirement. In this context, government initiatives aimed at providing financial security to senior citizens have become increasingly important. One such initiative is the Pradhan Mantri Vaya Vandana Yojana (PMVVY). This pension scheme, launched by the Government of India, is designed to provide a regular income to senior citizens, ensuring that they have financial stability in their later years.

In this blog, we will delve into the PMVVY scheme in detail, examining its features, benefits, eligibility criteria, and how it can contribute to the overall well-being of elderly citizens in India.

What is Pradhan Mantri Vaya Vandana Yojana?

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a government-supported social security program that guarantees a pension to senior citizens aged 60 and above. Launched by the Ministry of Finance in 2017 under the guidance of the Life Insurance Corporation of India (LIC), the scheme’s primary goal is to provide a steady income for elderly individuals during their post-retirement years. The amount paid by scheme buyers is referred to as the purchase price, and an assured return is provided on the investment.

Pensions can be received monthly, quarterly, semi-annually, or annually, depending on the investor’s choice.

Features of PMVVY

The PMVVY scheme is designed to be a reliable and attractive option for senior citizens seeking financial stability. Below are the key features of the scheme:

1. Pension Payment Options

PMVVY offers flexibility in terms of pension payouts:

• Monthly Pension: The pension is paid every month.
• Quarterly Pension: The pension is paid quarterly.
• Half-Yearly Pension: The pension is paid twice a year, in two installments of six months each.
• Annual Pension: The pension is paid annually.

The pension amount is calculated based on the investment made and the frequency of pension payouts chosen.

2. Tenure of the Scheme

The PMVVY scheme has a tenure of 10 years from the date of investment. At the end of the 10 years, the principal amount (investment) is refunded to the nominee or legal heir of the pensioner in the event of their demise.

3. Assured Return

The PMVVY offers an assured return of 7.4% p.a. (as of 2021), which is payable on a monthly, quarterly, half-yearly, or annual basis. The returns are guaranteed by the Government of India and are fixed for the entire duration of the scheme.

4. Loan Facility

PMVVY allows pensioners to avail of a loan of up to 75% of the purchase price after three policy years. This facility can be utilized in times of emergency or financial need. However, the loan interest will be charged at a rate of 10% per annum, and the loan must be repaid before the policy term is completed.

5. Taxation

The pension income received under PMVVY is taxable under the Income Tax Act of 1961. The tax is applicable as per the individual’s income tax slab. However, the principal amount (investment) is exempt from tax.

6. Premature Withdrawal

In the event of unforeseen circumstances, an investor may be able to exit the scheme prematurely. However, a penalty will be levied for premature withdrawal. The scheme is designed to provide long-term benefits, and premature withdrawal may result in reduced overall returns. If the policyholder dies prematurely, the nominee will receive the entire invested amount.

Benefits of PMVVY

PMVVY offers several benefits to senior citizens, such as:

• Guaranteed Income: One of the primary benefits of PMVVY is that it guarantees a regular income to senior citizens. This regular pension payout ensures financial independence and reduces the dependence on family or relatives.
• Government-Backed Scheme: PMVVY is backed by the Government of India, which assures the safety of investments. Since the scheme is run by LIC, one of the most trusted names in the Indian insurance sector, investors can rest assured that their funds are secure.
• Fixed Return Rate: PMVVY offers a fixed return of 7.4% per annum, which is higher than many other fixed-income investment options available in the market. This is particularly beneficial for senior citizens who may not be able to take on risky investments.
• Tax Benefits: Although the pension is taxable, the scheme offers a tax-free refund of the principal amount at the end of 10 years. Additionally, the scheme provides tax benefits for premiums paid under Section 80C of the Income Tax Act, 1961.
• Long-Term Security: The 10-year investment tenure provides a long-term income source. Additionally, the corpus amount (principal investment) is refunded to the nominee in the event of death, ensuring that the investor’s heirs are taken care of.

Eligibility Criteria for PMVVY

To avail of the benefits of the Pradhan Mantri Vaya Vandana Yojana, an individual must meet the following eligibility criteria:

1. Age: The applicant must be 60 years or older.
2. Residency: The scheme is available to Indian citizens and residents of India.
3. Investment Amount: The minimum purchase price (investment) is ₹ 1,50,000, and the maximum is ₹15 lakhs
4. Insurance Provider: The policy must be purchased from LIC of India, which is the only insurer authorized to offer this scheme.

How to Apply for PMVVY?

The process of enrolling in PMVVY is relatively simple and can be done in the following steps:

1. Visit LIC Branch: You can visit your nearest LIC branch or their official website to get the application form for PMVVY.
2. Fill Out the Form: Fill in the necessary details such as age, contact information, and preferred pension payout frequency.
3. Submit Documents: Submit the required documents, which may include proof of age, identity, and address.
4. Make the Payment: Pay the purchase price (investment amount) as per the selected pension option.
5. Receive the Policy: Once your application is processed, you will receive the policy document, which will detail the terms and conditions, pension amount, and payment frequency.

Conclusion

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is an excellent initiative by the Government of India aimed at providing financial security and a regular income to senior citizens. By offering a guaranteed return, flexibility in terms of payout frequency. As life expectancy increases and more people live well into their retirement years, schemes like PMVVY are critical in ensuring that senior citizens do not face financial hardship. With a steady income stream, the benefits of government backing, and the safety of a fixed return, PMVVY can significantly enhance the quality of life for senior citizens, enabling them to live with dignity and financial security in their golden years.