Pradhan Mantri Vaya Vandana Yojana, PMVVY, senior citizen, LICThe Pradhan Mantri Vaya Vandana Yojana (PMVVY) which was set to expire in 2018, has been extended to 2020. Its limit has also been hiked to Rs 15 lakh in the Union Budget 2018.

What is the PMVVY?

The PMVVY although marketed as a pension is essentially a fixed deposit with the Life Insurance Corporation of India (LIC). It is open to people above the age of 60 and guarantees an interest rate of 8% for a period of 10 years.  The minimum amount you can invest in the PMVVY (monthly option) is Rs 1.5 lakh and the maximum amount that you can invest was Rs 7.5 lakh. Budget 2018 has hiked this to 15 lakh.

The PMVVY was set to expire on 4th May 2018. Budget 2018 has increased its life to March 2020.

Surrender

You can surrender the PMVVY prematurely only in case of a critical illness or terminal affecting you or your spouse. In this case, a 2% penalty is charged on your corpus.

Loans

You can get loans up to 75% of the value of your PMVVY corpus for a period of up to three years.

Tax

Contributions to the PMVVY do not carry any tax deduction. The interest on it is also fully taxable. Interest on the PMVVY can be taken monthly, quarterly or annually. On maturity, your principal is returned to you.

Inheritance

In case of your death in this time period, the investment amount is paid to your heirs.

Rates

How do PMVVY rates compare with other savings schemes? Here’s a table:

Interest rates on major small savings schemes

Instrument Interest Rate % (Jan-March 2017) Interest Rate % (Jan-March 2018)
Post Office Deposits
Savings deposit 4 4
1 year time deposit 7 6.6
2 year time deposit 7.1 6.7
3 year time deposit 7.3 6.9
5 year time deposit 7.8 7.4
5 year recurring deposit 7.3 6.9
5 year Senior Citizens’ Savings Scheme 8.5 8.5
5 year Post Office Monthly Income Scheme 7.7 7.3
5 year National Savings Certificate 8 7.6
Public Provident Fund 8 7.6
Kisan Vikas Patra 7.7 7.3
Sukanya Samriddhi Scheme 8.5 8.1
Pradhan Mantri Vaya Vandana Yojana 8 8

 

You can invest in the PMVVY here.

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.