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?

Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 - 2023

Features and Eligibility of Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023

# Minimum Age at entry should be 60 Yrs of age.

# There is no maximum age limit set.

# The monthly pension will be 7.4% for FY 2020-21.

# The pension period or policy term is 10 Yrs.

# Minimum pension per month is Rs.1,000, quarterly is Rs.3,000, half yearly is Rs.6,000 and yearly is Rs.12,000.

# Maximum monthly pension in this plan is monthly Rs.5,000, quarterly Rs.15,000, half yearly Rs.30,000 and yearly Rs. 60,000.

# This plan will be available for sale from LIC of India. You can buy Pradhan Mantri Vaya Vandana Yojana (PMVVY) either through online or offline. But LIC is the only insurance company which will sell this.

# You can buy this plan from 1st April 2020 to 31st March 2023. Therefore, this plan is a limited period pension plan.

# 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.

# The pension will be directly credited to your savings account using NEFT facility or Aadhaar Enabled Payment System.

# 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.

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.

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.

# 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.

  1. No Tax Benefits-I may say this product as one more failure. Senior Citizens desperately looking for tax benefits tax relief when they receive the pension. However, this product fails to meet that expectation.
  2. 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.
  3. 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?
  4. Maximum Ceiling-The The maximum pension one can avail under this plan is Rs.5,000 a month and the maximum investable amount is Rs.7,50,000. This means that one can’t sustain by depending on this product itself. It is hard for an individual to survive with meager Rs.5,000 pension. It seems that the replication of Atal Pension Yojana. The only difference is, this is an immediate annuity plan but APY is a deferred annuity plan.
  5. Returns-The 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.
  6. 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.
  7. 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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