Summary: The PMVVY is an investment scheme wherein senior citizens can avail of a pension for 10 years. The current interest rate offered is 7.4%. The RBI Floating Bonds are of seven years tenure and currently offer 7.15%. They are available for all citizens. Returns on both products are taxable.
Pradhan Mantri Vaya Vandana Yojana (PMVVY) was launched a few years back to provide an avenue of income for senior citizens in the country. RBI Floating Rate Bonds have been available for investment from July 2020. Let us dive into the features of these investment options –
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Details
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PMVVY
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RBI Floating Rate Bonds
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What Is It
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A non-participating, non-linked scheme that can give the investor pension for 10 years.
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These bonds have a fixed tenure and a variable interest rate.
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Who Can Invest
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Indian citizens who are 60 years of age and above.
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Resident individuals and HUFs
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Minimum and Maximum Investment
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Minimum Purchase – ₹ 1,56,658
Maximum Purchase ₹15,00,000 “ |
Minimum – ₹1000
Maximum – No Limit |
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Tenure
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10-year scheme
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7 years
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Interest Rate
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7.40% p.a. payable monthly on policies purchased until 31st March, 2021. Then it will be set at the start of every financial year.
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7.15 % p.a. paid semi-annually. It will be reset every six months.
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Maturity/Death of Investor
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On the death of the investor during the policy term, the purchase price will be given to the beneficiary.
No maturity amount. |
The principal amount is paid at the end of seven years.
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Liquidity
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98%of purchase price will be paid on premature surrender in case of critical, terminal illness of self or spouse.
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Allowed for Senior Citizens after:
– 6 years for age group – 60 to 70 years – 5 years for age group – 70 to 80 years – 4 years for people above 80 years |
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Loan Facility
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75% of purchase price after 3 years of purchase subject to interest payment.
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They cannot be used as collateral for loan.
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Taxability
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The pension income is added to the individual’s total income and will be taxed as per the tax slab applicable.
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Interest is added to the income and taxed as per the applicable slab.
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Analysis
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There is low credit risk. Current interest rate is attractive compared to some other investment options. It does not offer income tax deduction.
It is a good option for retired people only. Retirees who need a regular source of income for some time can avail of it. |
They have low credit risk. Interest will vary. It is better than some fixed income products. For example, PPF interest rate is slightly less but it is more of an accumulation vehicle. Liquidity of the bonds is low.
The advantage is that there is no upper limit on investment and is available to non-senior and senior citizens. |
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