PMVVY is the full form for Pradhan Mantri Vaya Vandana Yojana and SCSS signifies Senior Citizen Saving Scheme. These are investment schemes especially reserved for the senior citizens. Both these schemes are extremely popular and currently in huge demand by the general public. Although these schemes can be availed for the benefit of the senior citizens, they are not similar to each other. The Senior Citizen Saving Scheme has been aiding the elderly for a long time. This scheme is available in the post offices too.
While SCSS has been present for a long time, the Pradhan Mantri Vaya Vandana Yojana has recently started. After the investment term ends, every investor wishes to gain huge returns. Thus, it is important to know the benefits and shortcomings of the schemes offered by different financial companies.
This article aims to enrich investors with more information about PMVVY and SCSS. These schemes will be compared to give a clear differentiation to the readers. This will be done based on the eligibility criteria, terms of the schemes, mode of payment, the interest rate, benefits such as death, maturity and premature closure, maximum and minimum investments, tax benefits, etc. In the end, we will deduce the best scheme for senior citizens based on our research. So, let’s begin our quest to avail of the best saving scheme.
The variations between PMVVY and SCSS
The difference between PMVVY and SCSS are:
1. Scheme Providers
PMVVY: this scheme is an initiative by the Life Insurance Corporation of India (LIC). Hence, it can only be purchased from this bank either online or offline. It was introduced in the year 2017.
SCSS: this scheme can be availed from the post office or any private or public bank in the country. This scheme is a government initiative that was introduced in the year 2004.
2. Policy Term
PMVVY: This scheme has a tenure of 10 years. The money remains locked for the complete period. This is best for people wanting to invest in long term
SCSS: This scheme has a tenure of 5 years, which can be further extended to 8 years. After the completion of 5 years, the user can extend the policy for more 3 years. This has a less investing period which gives flexibility to the users
Since the tenure of SCSS is less, this provides more flexibility to the applicants.
PMVVY: an initiative by the LIC, this scheme is available only for 6 years as extended by the government of India. From 4th March 2017 to 31st March 2023.
SCSS: the Indian residents can avail this scheme at any time. There is no availability window.
4. Payout Frequency
PMVVY: the applicants have 4 payout options i.e. monthly, quarterly, half-yearly, annual payouts. Once the investment begins, the interest varies every financial year as per the conditions in the market. Thereby making this scheme flexible.
SCSS: there is only 1 mode of payout i.e. every quarter year. The interest rate earned as per this scheme is constant throughout the tenure of 5 years.
5. Interest Rate
This is a dynamic part. Investment yield of the policy changes quite frequently, sometimes PMVVY gives better yield and other times SCSS gives out higher yield. As ofSept 2019, SCSS was offering a higher rate of interest. But right now, as of May 2020 the quarterly payments for both are the same.
PMVVY: the interest rate of this scheme differs according to different payout modes.
SCSS: the interest rate for the quarterly payout mode is 7.4%.
Therefore, the yield of SCSS exceeds that of PMVVY. Thus, SCSS is better than PMVVY.
6. Death Benefits
PMVVY: if the applicant expires before the maturity of the scheme, then his nominees will get the entire invested amount.
SCSS: there are no death benefits in this scheme, but nomination and joint application should be done.
7. Maturity Benefits
PMVVY: after the maturity of this policy, the applicants get the entire invested amount.
SCSS: upon attaining maturity, the invested amount is withdrawn and the account is closed.
8. Free Lock-in Period
PMVVY: this scheme has a free lock-in period of 30 days for online applicants during which the applicants can withdraw the scheme. For offline applications, the withdrawal period lasts for 15 days. The withdrawal can be ensured because of various personal reasons.
SCSS: there is no free lock-in period for this scheme.
PMVVY: there is no restriction towards the application of NRIs and HUFs, provided they are above 60 years of age.
SCSS: the NRIs and HUF cannot apply for this scheme.
10. Loan Facility
PMVVY: a loan can be availed against this scheme only after the completion of 3 years. The amount of loan offered is 75% of the initial investment.
SCSS: there is no loan facility under this scheme.
11. Age Limit
PMVVY: the minimum age limit for its application is 60 years.
SCSS: the minimum age limit for the application of this scheme is 60 years but retired government personnel above 55 years are also eligible for this scheme.
12. Maximum Investment
SCSS: the maximum investment for every quarter year is Rs.15,00,000 and the pension amount is Rs.27,750 per quarter.
13. Minimum Investment
SCSS: the minimum investment for every quarter year is Rs.1,000 and the pension amount is Rs.18.50 per quarter.
14. Interest Payment Mode
PMVVY: the Aadhar Enabled Payment System (AEPS) or National Electronics Fund Transfer (NEFT) is used to transfer the interest earned through this scheme to the bank account of the applicant.
SCSS: the interest earned through this scheme is transferred to the bank account of the applicant in the same branch. If the applicant has availed this scheme from a post office, then the amount will be credited to his savings account.
The payment mode of PMVVY is better than SCSS as it provides more flexibility to the applicants.
15. Premature Closure
PMVVY: premature closure of the PMVVY account is not possible. But under an emergency, LIC releases 98% of the invested amount as the premature closure amount.
SCSS: the premature closure is allowed only after the completion of 1 year of this scheme. If the account is closed before 1 year, then the applicant will be charged a penalty of 1.5% of the invested amount. If the account is closed after 1 month then the penalty assessed is 1.5% of the investment amount.
16. Income Tax Benefits
PMVVY: there are no tax benefits under this scheme. Yet the pension received is taxed.
SCSS: under section 80C and 24(b) of the income taxes acts, 1961the applicants can avail of several tax deductions.
17. Tax Deduction at Source (TDS) Facility
PMVVY: there is no TDS facility available for this scheme.
SCSS: if the interest rate earned exceeds the prescribed minimum limit, then TDS can be deducted on the interest.
18. Can I take Loan
PMVVY: PMVVY allows the depositors to take loans after completion of 3 years. However, you cannot withdraw the complete amount you invested. However, the policy allows you to withdraw about 75% of the benefit amount. Which means that you can take money against the initial amount you had used to purchase the policy.
The interest rate of 10 % is applicable and is deducted from your pension amount.
If the policyholder dies, the money will be recovered from the purchase amount.
SCSS:–No such facility is available under SCSS policy.
Only PMVVY provides facility to give out loans, hence they get an advantage here.
19. Taxes On Interest
Interests earned under both the scheme are completely taxable according to the prevailing tax rules
Can Invest In Both PMVVY and SCSS?
Yes, you can invest in both PMVVY and SCSS once you are more than 60 years of age. If you and your spouse are alive then you can invest a total of 60lakhs. They both offer great returns and have flexibility which can help in different circumstances.
Pradhan Mantri Vaya Vandana Yojana
PMVVY was introduced in the year 2017 by the Indian Government. This scheme serves a dual purpose for insurance and pension of the senior citizens. This scheme was introduced by the Life Insurance Corporation (LIC). It caters to the financial needs of senior citizens who have crossed 60 years. It could be taken from 4th May 2017 to 31st March 2020. But the government has now extended the date till 31st March 2023.
It renders to the post-retirement financial needs of the senior citizens when there is a fall in the interest rates. The assured rate of interest is 7.4% per annum for the entire tenure of 10 years. The government has introduced new reforms to this scheme in recent years.
Now the interest rate earned on this scheme will no longer be fixed. Instead, it will change every year the amount is invested. Therefore, a low-interest rate will be charged on the investments under PMVVY. For the new PMVVY, the modified interest rate cannot exceed 7.75% during any year.
Eligibility Rules For PMVVY
To avail of this scheme the applicants should fulfill some basic conditions as follows:
- The minimum age of the applicant for this scheme should be 60 years.
- The maximum age of the applicant is not bounded by any constraints.
- The minimum tenure of this scheme cannot be less than 10 years.
- The least amount of pension earned by the investor is Rs.1,000 per month, for the quarter year is Rs.3,000, for half-year is Rs.6,000, and for a year is Rs.12,000.
- The maximum amount of pension earned by the investor is Rs.10,000 per month, for the quarter year is Rs.30,000, for half-year is Rs.60,000, and for a year is Rs.1,20,000.
- When the maximum pension amount is being decided the entire family of the applicant is taken into consideration. This includes the spouse and other dependents of the applicant such as unmarried children below 25 years of age.
Necessary Documents Needed For The Application Of PMVVY
Apart from fulfilling the eligibility criteria, the applicants also need to submit documents as follows.
- Aadhar card or passport as a proof of address.
- PAN (Permanent Account Number) card.
- Details of the bank branch where the applicant wishes to credit the pension amount.
Salient Features Of PMVVY
The Pradhan Mantri Vaya Vandana Yojana has the following features:
- The pension payment of this scheme ensures the financial security of senior citizens after their retirement. This scheme provides a fixed amount towards the end of a certain period to every applicant. The fixed amount can be earned by the applicant for 10 years.
- Returns: The returns are earned at an interest rate of 7.4% per annum. The interest rate is likely to change every year.
- Payouts: As per the convenience and the financial requirements of individuals they can avail of payouts. Yearly, half-yearly, quarterly, and monthly are the payout options available for the applicants. As soon as the plan is purchased the first payment has to be made according to the payment mode chosen by the applicant. For instance, if a person has availed of the annual plan then he is liable to receive the first payment after one year from the purchase of the scheme.
- Maturity benefits: If the applicant is alive until the maturity of the scheme i.e. 10 years since its purchase then he is likely to receive maturity benefits. This benefit involves a lump sum purchase price of the plan which also includes the last installment payout.
- Death benefit: If the applicant expires during the term of the scheme then, his nominee or beneficiary can claim the entire purchase amount after submitting the relevant documents to the financial company.
- Surrender value: The applicants are allowed to withdraw the amount before the tenure of the scheme. During the premature withdrawal, the applicants can avail of 98% of the purchase value.
- Free lock-in period: This scheme also enables the applicants to withdraw their applications within 30 days from the date of receipt in case of an online purchase. If the applicant had purchased the scheme offline then the window for withdrawal is 15 days. A valid reason for withdrawal should be provided to the financial institution while returning the policy. The withdrawal could be due to several reasons from the customers’ side. For instance, the customer may not be satisfied with the terms and conditions of this scheme. After withdrawal, the entire amount will be credited back to the applicant. However, the charges for stamp duty will be deducted.
- Loan facility: The applicants are entitled to availing a loan against the PMVVY scheme after the completion of 3 years. The amount of loan offered to the pensioners is 75% of the purchase amount. The interest payment chosen by the borrowers according to the frequency of loan repayment will be deducted from the pension payment.
- Suicide: In case of an untoward situation, like a suicide then the entire amount is payable to respective claimants.
Payout Modes For The PMVVY
The individuals availing the PMVVY must select the frequency of payment. Four different payment modes are available for the eligible candidates.
i. Yearly Plan
According to this plan, the applicant will receive the pension amount only once a year. Only after the completion of 365 days from the date of purchase of the plan the payment will be credited to the applicant’s account. The interest rate charged for the yearly plan is 7.6%. This is the best plan in comparison to the other plans as the beneficiary will receive better returns.
ii. Half-Yearly Plan
Here, the applicant will receive his pension payments two times a year. The interest rate is 7.52%
iii. Quarterly Plan
As per this plan, the beneficiary is to receive his pension amount 4 times a year. The payout months are fixed. The pension payment during the quarterly plan is to be done on the first date of April, July, October, and January. The interest rate is 7.45%
iv. Monthly Plan
As the name suggests, the payments are done every month in this case. The rate of interest earned on this plan is 7.4%. This is the least return generating plan in comparison to the others.
Purchase Price Payment For Different Periodic Payouts Under PMVVY
The payout mode for the PMVVY scheme can be either monthly, quarterly, half-yearly, or yearly. The applicants can select the payout mode as per their convenience. Aadhar Enabled Payment System or the National Electronics Fund Transfer (NEFT) is the payment options available to the applicants. The purchase price has to be paid in a lump sum while choosing the plan. The choice of purchase price depends on the applicant.
The maximum and minimum purchase price for different modes of payment is given above in the table.
Have a look
Let’s look into an example. Consider Mr. Raj has purchased a pension plan for himself. He is a 60-year-old man with a yearly income of 6 lakh. He has invested a lump sum of Rs.8 lakh in the PMVVY scheme. So that he can avail of fixed income for the next 10 years post his retirement. He has selected the monthly payment mode to receive his pension amount.
According to the Pradhan Mantri Vaya Vandana Yojana, he can avail benefits under the following.
- Now that Mr. Raj has availed of monthly payout mode, he will receive the pension amount every month. Suppose the interest rate charged is 8% during a year. Then he is likely to be paid 8% of Rs. 8 lakh in that year. Therefore, he will be paid Rs.5,333 every month. Thus, without considering the market, he will receive Rs.5,333 every month as his pension for the next 10 years.
- After 10 years, the purchase price of Rs.8 lakh will be credited back to Mr. Raj.
- If, however, during the 10- year policy, Mr. Raj expires within 5 years from the start of the PMVVY scheme then his beneficiary will receive the entire purchase amount of Rs.8 lakh. This benefit can be availed only if Mr. Raj expires during the term of the policy.
- If Mr. Raj is facing a medical emergency at home or is in urgent need of money and he wishes to withdraw from the scheme then he will receive 98% of the total purchase price. This will sum up to Rs.7,84,000 lakh.
- If he is planning to renovate his house or purchase a new house, then he can also avail of a loan against the savings from the PMVVY scheme. This can be done only after the completion of 3 years from the start of the policy. Mr. Raj will get 75% of his purchase price to avail of the loan. That is Rs.6 lakh.
Procedure To Avail Of The PMVVY
This scheme can be availed in both online and offline methods from the Life Insurance Company of India (LIC).
This involves the applicants to visit any branch of LIC in India. There they are guided by the bank agents regarding the purchase price of their preference. After this, the application form has to be filled by them. The submission of the duly application form should be accompanied by the required documents.
The online application for the PMVVY can be submitted by following the steps given below.
- First, the individuals should log into the website of LIC India.
- Once the browser redirects the user to the LIC page, under the header ‘Buy Policy Online’ the option Pradhan Mantri Vaya Vandana Yojana should be clicked.
- Next, the applicant will be led to a new tab. Here, the user should click on button no. 842 i.e. ‘Buy Online’. A new page will show the option ‘Click to Buy Online’ on the left corner of the page which has to be clicked to proceed further.
- Now, the user will have to create an Access ID. This will contain details like name, mobile number, email address, date of birth, postal address, and servicing unit to create the Access ID. The access ID is a 9-digit entity that will be notified to the users either through mail or via SMS on the registered mobile number.
- The access ID notified to the users will now have to be submitted on the site by clicking the button ‘Submit’.
- After the user selects the purchase plan, he has to fill the application form. The submission of the duly filled application form should be accompanied by copies of the required documents and the payment amount. An acknowledgment and a policy number will be provided after the submission of the application are successful.
Frauds Under The PMVVY Scheme
If there are any frauds related to this scheme then the person insured will be informed within 3 years from:
- Issue date of the policy.
- Risk commencement of the policy.
- When the rider was added to the policy.
- The insurer must inform the insured person regarding the reason for taking the course of action. These details should be mentioned in writing, either to the insured, his nominees, or his legal representatives. The insurer can also commit fraud to deceive the insured person.
Senior Citizen Saving Scheme
SCSS is a savings scheme backed by the Indian Government. This scheme is designed for individuals over 60 years. The Indian Government had introduced this scheme in the year 2004. The main motive of this scheme is to make the senior citizens financially dependent after their retirement. The interest rate for the financial year 2020-21 is 7.4% per annum. The applicants who wish to apply for this scheme can do so in any public, or private banks and any post office in India. The tenure of this scheme unlike the PMVVY is 5 years. This can be extended by the applicants for another 3 years.
Eligibility Rules For SCSS
The applicants have to satisfy the following conditions to be eligible for this scheme.
- Individuals should be Indian residents.
- The age of the applicant should be above 60 years. All those individuals who have retired early around the age of 55 due to voluntary retirement or superannuation are also eligible for this scheme. This account should be opened within one month after the receipt stating the retirement benefits are issued.
- Individuals from the defense background are also eligible for this scheme. They can apply irrespective of the age limits. The other eligibility criteria need not be necessarily fulfilled too.
- This scheme is not valid for the Non-Resident Indians (NRIs) and the Person of Indian Origin (PIOs).
- This scheme is also not valid for the Hindu Undivided Family members.
Necessary Documentation For The Application Of SCSS
While applying the SCSS, the individual has to procure relevant documents such as follows.
- Aadhar card
- Voter ID card
- Permanent Address Number card
- Telephone bill
- Electricity bill
- Birth Certificate/ senior citizen card
- Passport size photo for attesting on the application form
Salient Features Of SCSS
- Revision of interest rates: The interest rates of this scheme are amended every quarter of the year. This modification in the interest rates is directly proportional to the changes in the economic conditions like prevalent rates in the market, inflation levels, etc. Sometimes the interest rates may remain the same if there are no significant changes in the economic conditions.
- Income: Once the interest rate has been declared during the initiation of this scheme then, it will remain fixed throughout the entire tenure.
- Minimum and maximum: To open an account under the SCSS scheme an individual has to deposit a minimum of Rs.1,000. The applicant can deposit up to the amount that he has received as the retirement benefit. Or in general, the deposit amount is ceased at Rs. 15 lakh whichever is lower. In case any individual owns multiple accounts then the sum deposited in all the individual accounts should not exceed the maximum limit.
- Maturity tenure: The duration for the investment of the SCSS is 5 years. However, if the applicants wish to extend the term then they will have to submit Form B. After submitting this form an extension of 3 years will be provided to the applicants. Thereby increasing the maturity period for 8 years.
- Premature closure and withdrawals: The applicants can relieve themselves of this scheme by withdrawing it before the completion of 5 years. The premature closure and withdrawal are permitted only after one year is completed from the start of the scheme. In case, of premature closure, the initial amount deposited in the account will be deducted. 1.5% of the deposited amount will be deducted on the withdrawal before the completion of 2 years. 1% will be deducted on withdrawal after the completion of 2 years. If, however, an applicant wishes to close the account after extending it for another 3 years then this can be done within the first year of the extension.
- Disbursal: The recipients of the pension are likely to receive their amount every quarter. This implies that every once in 3 months the pension amount will be disbursed against the deposited amount. The amount will be credited every first day of the months April, July, October, and January.
- Mode of deposit: The money can be deposited in cash if it is less than 1 lakh. Or else the applicant will have to pay a cheque if it is above 1 lakh.
- Nomination facility: This scheme provides the nomination facilities. This facility can be availed either during the initial stages of the scheme or at any other time. The nominee appointed by the applicant is entitled to claim the deposit in case of the death of the applicant.
- Returns: This scheme generated huge returns to its applicants.
Interest Rate Calculation For The SCSS
The calculation of the rate of interest is done every financial year. The amount charged with the interest rate is later disbursed quarterly at the beginning of 3 months i.e. April, July, October, and January. The main criteria behind the calculation of the interest rate are the principal amount deposited, the maturity period, and the current interest rate. Let us consider an example.
Mr. Raj has availed of the Senior Citizen Savings Scheme in the year 2020-21. He has deposited Rs.10 lakh for a term of 5 years at an interest rate of 7.4%. Therefore, the total returns that he will receive upon the maturity of this scheme are (10,00,000*0.074) *5=3.7 lakh. This 3.7 lakh will be received by the applicant during every quarter of the year for 5 years. In 5 years, a total of 20 quarters will be present. Thus, every quarter the applicant will receive 3,70,000/20=Rs.18,500. Thus, the total amount that the applicant will receive after the maturity of this scheme is Rs.10 lakh (the initial deposit) + Rs.3.7 lakh (the interest amount earned every quarter which is equal to a whopping 13.7 lakh.
Procedure To Avail Of The SCSS
i. Post Office
The Senior Citizen Saving Account can be opened in the post offices in India. The post offices are located at various locations all over India. This makes it easy for applicants from various regions to avail of this scheme. The interest earned through this scheme is credited to the savings account of the applicant in the same post office.
ii. Private and Public Banks
The SCSS can be opened in any of the private or public banks from India. There are several benefits of opening an SCSS account in these banks.
The interest earned in this scheme is directly credited to the savings account of the individual in the same bank or any of the branches of the same bank.
The individuals are notified about the account statements either through the post office or by emails.
Firstly, the applicant will have to visit the official portal of the India Post Office if he intends to open an account at the post office. Otherwise, if the applicant plans to avail of this scheme from any of the banks then he will have to visit the official website of the respective bank. Once, he is redirected to the official page he can download the application form for SCSS.
After downloading the form, the form will have to be printed. The applicants will later have to fill the form. This form should be submitted at the bank or the post office applied. The application form should be accompanied with some important information and KYC documents along with address proof, ID proof, age proof, and a cheque with the amount to be deposited.
The information includes the name of the applicant; his permanent address number, the name of the applicants’ father, mother, and spouse; name, age, and address of the co-applicant in case of joint application; name, age, and address of the nominee.
Tax Benefits On SCSS
- The investment made towards this scheme is eligible for a tax deduction under Section 80C of the Income Tax Act, 1961. A total of Rs.1.5 lakh will be deducted on the principal amount paid in this scheme. This is allowed only under the existing taxing laws. If any individual has chosen to avail of the tax returns under the Union Budget 2020, then he is not entitled to the deduction in taxes.
- As per Section 24(b) of the Income-tax Act, 1961 the interest earned in this scheme is taxable. However, the applicants can avail of a deduction of Rs.50,000 towards the interest amount earned.
1. Can individuals invest in both PMVVY and SCSS?
Yes, individuals can make investments in both the schemes at the same time. They can invest 10 lakh each in both these schemes. Thus, a total of 20 lakh will be invested.
2. Is the interest rate for the PMVVY scheme fixed?
No, as per the new reforms in this scheme, the interest rates are liable to change every year.
3. What are the tax benefits that the applicants can avail from this scheme?
There are no tax benefits for the investments towards this scheme, unlike the other pension schemes.
4. Can a joint account facility be availed by the applicants of the senior citizen savings scheme?
Yes, this facility is available if the individual plans to open an account with his/her spouse.
5. Can I open a joint SCSS account with my son?
No, this is not allowed. The co-applicant of the joint account should be the spouse of the applicant.
6. Who is eligible to be a co-applicant in a joint SCSS account?
An individual can open the SCSS account who is above 60 years of age. But there is no age limit for the co-applicant. However, the co-applicant should be the spouse of the applicant of this scheme.
7. What is the minimum limit to the number of accounts a single person can open?
An individual can open as many accounts as he desires; however, the amount deposited should not exceed the maximum limit.
8. What happens when both schemes attain maturity?
When the schemes mature, the individuals receive the initial investment amount along with the remaining interest earned periodically over the entire term.
9. In case of a joint application, if the spouse is less than 60 years old, then is he/she eligible?
No. According to the eligibility criteria, an individual should be 60 years old to apply for SCSS. But retired government officials above 55 years of age can apply.
10. Are the interest rates fixed for PMVVY and SCSS?
The interest rate of SCSS is fixed. This will be fixed at the time of investing. However, for PMVVY, the interest rate changes every financial year. Thus, it is no fixed interest rate.
11. Once the scheme attains maturity will the interest rate change if the individual purchases it again?
Yes, after attaining maturity the interest rate at that particular time will be charged if the individual purchases the scheme again.
12. If PMVVY or SCSS is the only source of income for the individual then is he liable to pay the tax?
If the combined interest of both these schemes is less than 2.5 lakh, this is exempted from taxes. But the investors are advised to file zero tax although the tax payment is exempted.
13. After the extension of the SCSS can the investors avail of any tax benefits?
No, there are no tax benefits during the extended period of SCSS. However, if the individuals have invested a new amount then they can get a tax deduction.
The Pradhan Mantri Vaya Vandana Yojana and the Senior Citizen Savings Scheme are good investment options for every senior citizen. These schemes are similar to each other. They aim to provide financial security to individuals after their retirement. Although the intent is the same, there are several distinct features among the two which makes them unique. Every individual has different financial needs. Every individual must look into the benefits and differences of these schemes in great detail. Thus, if PMVVY proves to be beneficial for an individual this does not mean that his friend will also meet with the same fate.
Although there may still be a lot of doubt individuals can also invest in both the schemes at the same time. This will enable them to understand their financial aims. As these are the most popular schemes available for senior citizens in the modern world, they should make the best use of it. Every individual should carefully evaluate his financial status and needs. Through this article, every aspect of both schemes is highlighted. Hence after reading it, the applicants will have an upper hand at deducing the right scheme for themselves.