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Pradhan Mantri Vaya Vandana Yojana – PMVVY Scheme With Calculator

By:MoneyChai Retirement Last Updated: 8 Jun, 2019

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a pension scheme that has been introduced for the social welfare of people aged 60 and above. Officially launched on 21st July 2017, the initiative aims to provide financial security to senior citizens through a regular pension.

Pradhan Mantri Vaya Vandana Yojana - PMVVY Scheme With Calculator

What is LIC PMVVY scheme?

The LIC PMVVY scheme promises a regular pension with an assured return of 8%-8.30% annually for a term of ten years. Furthermore, senior citizens can enjoy a monthly pension of minimum 1,000 and maximum 10,000 depending on the amount invested by them. They can receive this pension in monthly, quarterly, half yearly or yearly modes as per their requirements.

Earlier, the last date to apply for the PMVVY scheme was 4th May 2018 but now the government has extended it to 31st March 2020. Not only that, the maximum investment limit has been increased from 7.5 lakhs to 15 lakhs and it’s no longer limited to one head per family.

Now, both husband and wife can invest up to 15 lakhs each (30 lakhs in total) and claim benefits separately. The PMVVY scheme can either be purchased offline or online through the official website of LIC India.

If you’re planning to invest in the PMVVY scheme, it’s extremely important to consider the advantages and limitations of the plan. More essentially, you should purchase the scheme only after determining whether the pension would be enough for your future needs.

Pradhan Mantri Vaya Vandana Yojana – LIC PMVVY scheme details

Here are the scheme details of LIC PMVVY

  1. Minimum age to apply: 60
  2. Maximum age to apply: No limit
  3. Policy Term: 10 years
  4. Minimum Investment Amount: 1,44,578
  5. Maximum Investment Amount: 15 lakhs
  6. Minimum Assured Pension: 1,000 per month
  7. Maximum Assured Pension: 10,000 per month
  8. Mode of Payment (Pension): NEFT or Aadhar enabled payment system

LIC PMVVY Scheme

Let’s take a real-life example to help you understand the different pension receiving modes.

Ramesh, a senior citizen, has invested an amount of 7 lakhs in the PMVVY scheme for policy term of 10 years. Here the details of his plan.

Age: 60
Purchase Price: Rs. 7,00,000
Policy Tenure: 10 years
Purchase Year: 2019

Now we’ll consider the different pension receiving modes one by one.

Monthly Mode – Rs. 4667

The rate of interest is 8% of the total purchase price. So, 8% of 7 lakhs will be divided by 12 for determining monthly pension.

Here’s the calculation for better understanding.

Rate Of Interest: 8℅ p.a.

7,00,000 X 8\100 = 56000

56000÷12 = 4667

Hence, Ramesh will get a pension of Rs.4667/pm if he opts for the monthly mode.

Yearly Mode: Rs. 58000

The rate of interest is 8.3% for yearly mode. So, 8.3% of 7 lakhs will be the yearly pension of Ramesh.

Here’s the calculation for better understanding.

Rate Of Interest: 8.3℅ p.a.

7,00,000 X 8.3\100 = 58100

Half Yearly – Rs. 28455

The rate of interest is 8.13% for half yearly mode per annum. So, 8.13% of 7 lakhs divided by 2 will be half yearly pension of Ramesh.

Here’s the calculation for better understanding.

Rate Of Interest: 8.13% p.a.

7,00,000 X 8.13\100 ÷ 2 = 28455

Quarterly – Rs. 14088

The rate of interest is 8.05% for quarterly mode per annum. Each quarter consists of 4 months. So 8.05℅ of 7 lakhs divided by 4 will be quarterly pension of Ramesh.

Here’s the calculation for better understanding.

Rate Of Interest: 8.05% p.a.

7,00,000 X 8.05\100 ÷ 4 = 14088

PMVVY Calculator in Excel

Please download on the below mentioned link to download PMVVY calculator in Excel

PMVVY Calculator

Advantages of the PMVVY scheme

Regular Pension Payments

The PMVVY scheme offers regular pension to senior citizens for the policy term of 10 years. Pension amount depends on the investment made by the policyholder.

Maturity Benefit

In case the policyholder survives the policy term of the duration, he/she can get the entire purchase price (investment amount) with the last installment of the pension.

Death Benefit

If the policyholder dies in case of an unfortunate event, the entire purchase price will be returned to the designated nominee.

Surrender Value

A policyholder can withdraw from the PMVVY scheme under unfortunate circumstances when there’s an urgent requirement for money like critical and terminal illness of self or spouse . The surrender value (the amount that is refunded) is equivalent to 98% of the total investment made for the PMVVY scheme.

Loan Facility

A policyholder can avail a loan of 75% on the purchase price after holding the PMVVY scheme for 3 years.

Free Look Period (Policy Return Period)

The policy offers a free look period of 30 days for online purchase and 15 days when it’s bought offline. Also, if the policyholder isn’t satisfied with certain terms and conditions of the policy, he/she can return the policy to the corporation and get the purchase price back. Additionally, the policyholder need not pay the stamp duty charges for returning the policy.

No Exclusions

Under Pradhan Mantri Vaya Vandana Yojana, there are no exclusions. Even in the case of suicide, the scheme will return the entire purchase amount to the chosen beneficiary.

Disadvantages of PMVVY scheme

No Tax Benefits

 The biggest disadvantage of the PMVVY scheme is that it does not offer any tax benefits. As a matter of fact, even the pension is not free from tax.

Lack of Liquidity

Liquidity is another major disadvantage of the PMVVY scheme. Although the scheme features a loan facility and good surrender value, the entire investment cannot be liquidated irrespective of the situation.

Final Words

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is undoubtedly a great social initiative taken by the Indian Government. But, lack of tax benefits and liquidity are its major disadvantages.

The PMVVY scheme can be a good option if you’re taking it to meet your regular income needs. However, you must consider important factors such as inflation and ensure that the pension amount would be enough for your needs.

Is PMVVY good for investment?

On the other hand, you should never purchase the PMVVY scheme for investment purposes because this scheme does not have liquidity. Not just that, the PMVVY scheme does not even have any tax benefits. Although the scheme returns may seem attractive but taking inflation into consideration, they do not have much value. For these reasons, PMVVY scheme is not good for investment.

Should I take PMMVY?

As far as taking PMVVY scheme is concerned, it depends on your requirements. You can take the PMVVY scheme if the monthly pension is sufficient for your needs. However, you should not take the PMMVY scheme for investment purposes .

Let’s answer the most commonly asked questions about the PMVVY scheme.

When was Pradhan Mantri Vaya Vandana Yojana launched?

The Pradhan Mantri Vaya Vandana Yojana was officially launched on 21st July 2017.

Is PMVVY eligible for 80C Deduction?

No, PMVVY is not eligible for 80C deduction as per the Income Tax Act. Hence, you cannot claim any deduction for investments.

Does PMVVY have any tax benefits?

No, PMVVY does not have any tax benefits and neither is the pension tax-free.

Is PMVVY scheme exempted from GST?

Yes, the Goods and Services Tax (GST) is not applicable to the PMVVY scheme.

What is the last date for PMVVY scheme?

As per the revisions under the budget proposal, the last date to apply for the PMVVY scheme is 31st March 2020.

If you still have any doubts regarding the PMVVY scheme, feel free to come in contact and we’ll be more than glad to help you out.

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Filed Under: Retirement

MoneyChai

Hi, I am Ajay Pruthi, an alumnus of NIT Jalandhar and K.J. Somaiya Institute of Management Studies. I have over 10 years of experience in the field of insurance and have worked with top two private insurance players in the country. I am a Certified Financial Planner and currently working as a Paraplanner with Mr. Melvin Joseph, founder of Finvin Financial Planners. If you liked my blog and want to discuss further on comprehensive fee only financial planning, feel free to get in touch by visiting Finvin Financial Planners.

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Hi,
I am Ajay Pruthi, an alumnus of NIT Jalandhar and K.J. Somaiya Institute of Management Studies. I have over 10 years of experience in the field of insurance and have worked with top two private insurance players in the country.

I am a Certified Financial Planner and currently working as a Paraplanner with Mr. Melvin Joseph, founder of Finvin Financial Planners.

If you liked my blog and want to discuss further on comprehensive fee only financial planning, feel free to get in touch by visiting Finvin Financial Planners.

 

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