There is now a new chance to invest in the Pradhan Mantri Vaya Vandana Yojana (PMVVY) for senior citizens seeking regular income, safety and fair returns as the scheme has now been extended till March 31, 2023. With a current interest rate of 7.4% (revised on a yearly basis) which is reduced from 8 per cent if we compared to the previous year, PMVVY is open till March 31, 2021. Considering the sovereign security and the lucrative interest rate by small-savings schemes and FDs of small finance banks, you need to take serious care of it.
What's there for me?
If compared to other investment vehicles for senior citizens such as Post Office monthly income scheme with an interest rate of 6.6 per cent and special fixed deposits only for senior citizens by SBI, HDFC and ICICI with a current interest rate of 6.2 per cent, 6.25 per cent and 6.3 per cent only, PMVVY is no doubt going to be the only bet here with a higher interest rate of 7.4%. Apart from the interest rate, there is no credit risk as PMVVY is backed by the government of India. For those who do not want to rethink about their portfolios now and then, the longer tenure of 10 years fits good.
PMVVY vs other schemes
PMVVY contributes to the rising range of offerings aimed at senior citizens only. The enticing choice here could be the Senior Citizen Saving Scheme (SCSS) with an interest rate of 7.4 per cent and a tenure of 5 years only. For the current financial year, PMVVY's interest rate is now the same as that of SCSS. Apart from SCSS there are now some small finance bank FDs for senior citizens which will give them an interest rate of up to 8%. For those looking for other investment vehicles with higher returns but same tenure these small finance bank FDs can also be the consideration, as PMVVY comes with a tenure of 10 years and maximum deposit limit is Rs 15 lakh.
Taxation and maturity period
Compared with SCSS which has 5 years of maturity period and can be extended further to a block of 3 years, the PMVVY has a longer maturity period of 10 years. Premature exit from the PMVVY is permitted only if the account holder or his spouse if suffering from a serious health condition. In detail, 98 per cent of the purchase price is compensated to the subscriber. By deducting up to 1.5 per cent penalty from the deposit SCSS also facilitates premature withdrawal. Coming to taxation SCSS contributions count for 80C tax deductions of up to Rs 1.5 lakh in a financial year but under section 80C of the Income Tax Act, the Pradhan Mantri Vaya Vandana Yojana (PMVVY) policy does not give tax deduction benefit. As per current tax regulations, returns from this scheme will be taxable.
Should I Invest?
PMVVY is a good investment choice for regular income searching investors. It may be beneficial to consider this choice if we look at the current falling interest rate of bank FDs. Senior citizens having a low income can go for both SCSS and PMVVY as this strategy will allow you to invest up to Rs 30 lakh. If you charge up your investments in a dropping interest rate circumstance, then you are subjected to the possibility of getting your wealth at a lower interest rate upon maturity. Here, the hidden truth to generate good wealth for your retirement is to keep some capital in banks' fixed deposits to overcome crises and encounter short-term financial objectives.