Old age comes with great challenges in life both physically and financially. That is the reason why people say that you should secure your future at the right time so that you can enjoy your old age tension-free. But some people live each day as it passes by and does not think about the future.Read more
Having said that, even though you don’t think about planning your old age when you are young, you have to think at some point in time. The sole reason behind financial security is the everyday growing cost of medical expenses.
To relieve their financial burden, the Government of India has taken a lot of initiatives to set up the welfare of senior citizens of our country. There are a lot of pension schemes to support senior citizens in creating a steady income and relieve their financial burden.
In this article, we will discuss 2 such pension schemes offered by the government of India, that is, the Senior Citizen Savings Scheme and Pradhan Mantri Vaya Vandana Yojana.
A Government-sponsored savings option, specifically designed to provide financial security to the senior citizens of the country. The Senior Citizen Savings Scheme offers regular income to Indian residents aged 60 years and above even after retirement. The deposits under the scheme are invested for the tenure of 5 years and also can be extended once by the addition of 3 years.
The Senior Citizen Savings Scheme focuses to mobilize small savings into regular returns, along with investments and tax benefits.
Senior Citizen Saving Scheme is an ideal option because it is a savings plus investment instrument for senior citizens. Being a government-backed investment plan, it offers a higher rate of interest than other usual plans. The SCSS is formulated to fulfill the particular insurance needs of an investment-oriented senior citizen.
Let’s look at some benefits of the SCSS scheme
You have to visit the nearest bank or post office. Fill out the Senior Citizen Savings Scheme form and you are done.
As it is an Indian Government backed-up scheme, thus security and reliability are fully assured.
Multiple Senior Citizen Savings Scheme accounts can be opened by an individual, individually or jointly. It is to be noted that the other investor should be the spouse of the primary investor.
With a rate of interest of 7.4% annually, the returns on the SCSS are very satisfying.
The Senior Citizen Savings Scheme comes with a period of five years but it can be extended up to 3 more years. This way, the SCSS acts as a mid-term as well as a long-term investment tool.
According to Section 80C of the Income Tax Act, 1961, senior citizens can save TDS on Senior Citizen Savings Scheme.
There is only one investment permissible for every SCSS account. The amount needs to be a multiple of 1000 rupees and it should not exceed 15 Lakh. This makes the SCSS investment option pretty scalable and affordable.
If you are going through tough times financially, you can easily close your Senior Citizen Savings Scheme account, but only after the scheme is active for 365 days. Although after 365 days, 1.5% is charged as a penalty, and the funds in your SCSS account are deducted accordingly. In case of termination after 2 years, 1% is deducted as a penalty.
The application process of the Senior Citizen Saving Scheme requires minimum paperwork. The KYC documents usually include the birth certificate, passport, voter’s id, PAN card, senior citizen card, etc.
For Senior Citizen Saving Scheme eligibility, you need to fulfill the following criteria.
An applicant can be in 55-60 years of age, provided the person has been retired under the VRS category. The retired policyholder must have a Senior Citizens Saving Scheme account within 1 month of enjoying the retirement benefits. Also, the invested amount cannot be more than the amount of the retirement benefits.
The below documents are required to open an SCSS account in India:
Pradhan Mantri Vaya Vandana Yojana is a non-participating, non-linked pension scheme that is launched by the Government of India. The modified scheme includes pension rates and an extended period of sale of this policy for an extended time of 3 years from the financial year 2020-21 up till 31st March 2023. Pradhan Mantri Vaya Vandana Yojana offers a loan and the interest on it would be recovered from the pension sum, payable under the plan. The applicable rate of interest should be based on options that are approved by the IRDAI.
Pradhan Mantri Vaya Vandana Yojana Policy comes with the following benefits
If the policyholder survives during the whole policy term, that is 10 years, pension at the termination of each period shall be payable.
In case of the unfortunate demise of the policyholder during the policy tenure of 10 years, the Total Purchase Price shall be refunded to the nominee or beneficiary.
On survival of the policyholder throughout the policy tenure of 10 years, the Purchase price, including the final pension installment, shall be payable.
The policy allows a premature exit only during special circumstances like if the policyholder requires money for the certain treatment of a critical/terminal illness of the self or spouse. The Surrender Value payable in such scenarios shall be 98% of the original Purchase Price.
A loan facility is provided under Pradhan Mantri Vaya Vandana Yojana and could be availed after the completion of 3 years of the policy. The maximum loan which can be given is 75% of the Purchase Price. The interest rate charged for the loan sum should be considered at periodic intervals.
One can avail of the income tax benefits on prepaid premiums and the eligible benefits would be as per the existing income tax laws.
* Tax benefits are subjected to certain changes in the tax laws
For buying the Pradhan Mantri Vaya Vandana Yojana scheme, you need to be eligible in the following criteria:
|Policy Tenure||10 years|
|Premium Paying Term||10 years|
|Premium Paying Mode||Yearly, Semi-Annually, Quarterly, and Monthly.|
|Entry Age||60 years|
|Maturity Age||70 to 10 years after the entry age|
|Grace Period||30 days|
|Sum Assured||A maximum pension of ₹1,11,000/ can be availed|
|Liquidity||The loan can be availed under this plan|
One is advised to keep the mentioned documents ready to buy Pradhan Mantri Vaya Vandana Yojana
Here is an elaborative difference between Senior Citizen Savings Scheme and Pradhan Mantri Vaya Vandana Yojana that will help you understand both schemes better
|Basis||Senior Citizen Savings Scheme (SCSS)||Pradhan Mantri Vaya Vandana Yojana (PMVVY)|
|Policy Term||5 years, with an extension option of 3 years after maturity||Assured pension for 10 years|
|Frequency of Payout||Quarterly||Monthly, quarterly, half-yearly, yearly, as selected|
|Age of Beneficiary||Individuals aged 60 years and above or retired employees in the 55-60 years age group, investing their retirement benefits||Only senior citizens of age 60 years and above|
|Taxability||The deposits in the Senior Citizen Saving Scheme account is eligible for income tax benefit u/s 80C of the Income Tax Act, 1961||One can avail of the income tax benefits on premium, which is already paid, and the eligible benefits would be as per the existing income tax laws|
|Return||7.4% rate of interest annually||Maximum Sum Assured is 1,11,000/-|
Both Senior Citizen Savings Scheme and Pradhan Mantri Vaya Vandana Yojana have their pros and cons. Both schemes offer flexibility that brings in amazing benefits at your old age. It is a hard choice to make between the 2 schemes but the final assurance would be that both are Government-backed schemes and hence are 100% authentic. Bringing in fixed returns to meet your regular income needs, the choice is completely up to you.
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*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^Tax benefit are for Investments made up to Rs.2.5 L/ yr and are subject to change as per tax laws.
+Returns Since Inception of LIC Growth Fund
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