Important keyword: Income Tax, PMVVY, PMVVY Benefits, Tax Benefits.
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Pradhan Mantri Vaya Vandana Yojana (PMVVY)
The government has launched the ‘Pradhan Mantri Vaya Vandana Yojana (PMVVY)’ to provide social security to senior citizens aged 60 and above. This scheme aims to protect them from fluctuations in interest earnings caused by market uncertainties. It offers financial stability during old age by providing either a guaranteed pension or returns linked to the subscription amount. The assurance of returns is backed by the government’s commitment to the Life Insurance Corporation of India (LIC), ensuring a secure investment avenue for seniors seeking reliable income post-retirement.
What is the Pradhan Mantri Vaya Vandana Yojana (PMVVY) Scheme?
The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a retirement and pension scheme administered by LIC of India and supported by the Government of India under the National Savings Scheme. This scheme is designed to provide financial security to senior citizens aged 60 years and above. Investors can make a lump-sum investment and receive guaranteed pension payments on a monthly, quarterly, semi-annual, or annual basis for a period of 10 years.
Initially launched from March 4, 2017, to March 31, 2020, the PMVVY scheme has been extended for an additional three financial years until March 31, 2023, as per a government announcement dated May 20, 2020. LIC holds the exclusive privilege to operate this scheme, offering enrollment through their official website or branch offices.
Eligibility criteria for PM Vaya Vandana Yojana
Eligibility for PM Vaya Vandana Yojana is open to resident senior citizens above 60 years with no maximum entry age limit. The total investment amount should not exceed INR 15 lakhs. It’s crucial to consider family size when selecting the pension amount, where family includes a spouse and dependent children like unemployed sons or unmarried daughters below 25 years.
The interest rates for PMVVY vary based on the frequency of pension payments:
Monthly pension: 7.4% per annum
Quarterly pension: 7.45% per annum
Half-yearly pension: 7.52% per annum
Yearly pension: 7.66% per annum
Minimum and Maximum Amount of Purchase price and Pension
Mode of Payment
Minimum Purchase Price (Installment or Investment)
Minimum Pension Amount against the Purchase Price
Maximum Purchase Price (Installment or Investment)
Maximum Pension Amount against the Purchase Price
Monthly
INR 1,56,658
INR 1000
INR 14,49,086
INR 9,250
Quarterly
INR 1,59,574
INR 3000
INR 14,76,064
INR 27,750
Semi-Annually
INR 1,61,074
INR 6000
INR 14,89,933
INR 55,500
Annually
INR 1,62,162
INR 12000
INR 15,00,000
INR 1,11,000
Benefits of Pradhan Mantri Vaya Vandana Yojana
Investing in the Pradhan Mantri Vaya Vandana Yojana (PMVVY) offers several significant benefits for senior citizens:
Income Tax Benefits:
Seniors can claim a deduction of up to INR 1,50,000 on the investment amount under Section 80C of the Income Tax Act. However, the interest earned is taxable as per the individual’s applicable tax slab.
Premature Withdrawals and Loan Facility:
In case of emergencies for the pensioner or their spouse, the scheme allows premature withdrawals. Upon withdrawal, the pensioner receives 98% of the purchase price. Additionally, after three years from the policy commencement, one can avail a loan against the PMVVY investment up to 75% of the purchase price. The interest on the loan is deducted from the pension payments as per the chosen frequency. Any outstanding loan amount at maturity or surrender will be deducted from the final claim amount.
Maturity Benefit:
Upon completion of the policy tenure, PMVVY provides the entire purchase price as a lump sum, provided the pensioner survives till the end of the policy term. If the pensioner passes away during the policy term, the nominee or beneficiary can claim the entire purchase amount by submitting the required documents.
How to Register for the PMVVY Scheme?
To enroll for the Pradhan Mantri Vaya Vandana Yojana (PMVVY), individuals have the option to apply either online through the official LIC website or offline by visiting a nearby LIC branch. Here’s how you can apply online:
Visit LIC’s Official Website: Go to the official website of the Life Insurance Corporation of India.
Navigate to ‘Buy Policy Online’: Look for the section dedicated to buying policies online. Find and select the Pradhan Mantri Vaya Vandana Yojana option.
Click on ‘Buy Online’ (Button no. 842): Locate and click on the ‘Buy Online’ button corresponding to PMVVY.
Create Access ID: You will need to create an Access ID by providing necessary details such as your name, email ID, mobile number, date of birth, and address. This Access ID, a 9-digit identifier, will be sent to your registered mobile number or email.
Proceed with Access ID: Enter the Access ID you received and click on ‘Proceed’ to continue.
Select Pension Plan: Choose the appropriate pension plan under PMVVY that suits your requirements.
Fill Application Form and Upload Documents: Complete the application form with accurate details and upload the necessary documents, including Aadhaar Card, PAN Card, and bank details where you want the pension to be credited.
Submission and Acknowledgment: After successfully submitting the form and documents, you will receive an acknowledgment number and policy number.
Alternatively, you can visit your nearest LIC branch to apply for PMVVY. Fill out the application form provided and specify your interest in the Pradhan Mantri Vaya Vandana Yojana. Ensure you carry all required documents for submission along with the application form.
Important keyword: Benefits, Income Tax, Tax Benefits.
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Employee Pension Scheme (EPS) – Eligibility, Benefits and Calculation
The Employee Pension Scheme (EPS), launched by the Employees Provident Fund Organisation (EPFO) in 1995, is designed to ensure financial security for salaried employees during retirement by providing a steady income stream. This scheme becomes accessible to employees after completing 10 years of service and reaching the age of 58.
Under EPS, employers contribute 12% of an employee’s salary to their EPF account. This contribution is split, with 8.33% allocated to EPS and 3.67% to EPF. Notably, the EPS contribution is calculated based on the actual salary if it’s below INR 15,000 per month; if higher, it’s computed on a maximum of INR 15,000. This makes the maximum monthly EPS contribution INR 1,250.
EPS ensures that employees receive a pension that is proportionate to their length of service and average salary, offering a reliable income source post-retirement. Understanding these aspects helps employees plan effectively for their financial futures, ensuring they benefit fully from the provisions of EPS as part of their overall retirement planning through EPF.
What is the Eligibility Criteria to Avail Employee Pension Scheme Benefits?
To qualify for Employee Pension Scheme benefits, certain conditions must be met. First, an individual needs at least 10 years of service and must be a member of EPFO (Employee Provident Fund Organization). The standard retirement age for accessing pension benefits is 58 years. However, it’s possible to withdraw the EPS balance starting at age 50.
Additionally, there’s an option to extend pension benefits up to age 60, which offers an increase of 4% per year for those who opt for this extension. If someone has worked for less than 10 years but is unemployed for more than two months, they can still withdraw from their Employee Pension Scheme.
How is the Pension under the Employee Pension Scheme Calculated?
Under the Employee Pension Scheme, the pension amount a person receives is calculated based on their pensionable salary and pensionable service. The monthly pension is determined using a formula that divides the pensionable salary by 70 and multiplies it by the pensionable service in years.
For instance, if Purva’s monthly salary is INR 15,000 and her EPS contribution rate is 8.33%, her pensionable salary would be approximately INR 1,250 per month. Assuming her pensionable service is 9 years and 7 months, her pensionable service period is considered as 10 years. Therefore, her estimated monthly pension would be INR 2,142.85.
The Employee Pension Scheme offers several types of pensions:
Widow Pension: This pension is granted to the spouse after the employee’s death. The widow receives this pension until her death or remarriage, with a minimum amount set at INR 1,000.
Child Pension: Dependent children of the deceased employee receive 25% of the widow pension until they turn 25 years old. This pension is provided concurrently with the widow pension.
Orphan Pension: In the absence of a surviving spouse, orphan children receive up to 75% of the widow pension. This benefit is available to a maximum of two surviving children, allocated from oldest to youngest.
Reduced Pension: Employees who opt to withdraw their pension from the age of 50 onwards receive a reduced pension amount. The reduction is calculated at 4% for each year less than the retirement age of 58. For example, withdrawing at age 55 results in a pension amount reduced to 88% of the original pension.
How can I check my Employee Pension Scheme amount?
Follow the below-mentioned steps to check your EPS amount at any given point:
Visit Employees Provident Fund Organisation Portal Go to Employees Provident Fund Organisation Portal
Click on ‘Services’ Now click on ‘Services’
Select ‘For Employees’ Click on ‘For Employees’
Go to Member Passbook Under ‘Services’ click on Member Passbook
Add your UAN and Passoword Enter your UAN and Password
Select ‘Member ID’ and see you EPS Amount Click on the concerned Member ID and you can now see your EPS amount in your Pension Contribution column
You can also check your EPS amount in your EPS account passbook as well. You can download the passbook from the EPF pensioners portal.
Important Keyword: EEE, EET, ETE, Income Tax, Tax Benefits.
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Understanding EEE, EET and ETE
To effectively grow capital while minimizing tax liability, individuals in India can explore various investment opportunities that offer tax benefits aligned with their financial goals. The government encourages savings by providing tax relief on investments in specific instruments, up to prescribed limits. It’s essential to grasp how these investments are taxed, categorized primarily into three frameworks: EEE, EET, and ETE. These classifications elucidate the tax implications associated with investments, aiding individuals in making informed decisions.
EEE (Exempt-Exempt-Exempt):
Investments falling under the Exempt-Exempt-Exempt category offer tax exemption at three stages:
Investment Stage: Contributions made towards these investments are eligible for tax deductions under relevant sections of the Income Tax Act, reducing taxable income.
Accumulation Stage: Income or gains generated within the investment (such as interest, dividends, or capital gains) are tax-free.
Withdrawal Stage: Upon maturity or withdrawal, the entire corpus, including accrued income, remains tax-exempt.
Examples of EEE investments include Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), and certain pension plans.
EET (Exempt-Exempt-Taxable):
Investments categorized under EET enjoy tax benefits at two stages, with taxation applicable at the final stage of withdrawal:
Investment Stage: Contributions may qualify for tax deductions, reducing taxable income.
Accumulation Stage: Income or gains generated within the investment are tax-exempt.
Withdrawal Stage: Upon maturity or withdrawal, the accumulated corpus and any gains are subject to taxation as per prevailing tax rates.
Examples of EET investments include Employee Provident Fund (EPF) and National Savings Certificate (NSC).
ETE (Exempt-Taxable-Exempt):
Investments under ETE receive tax exemption at the initial and final stages, with taxation applicable during the accumulation phase:
Investment Stage: Contributions are eligible for tax deductions, reducing taxable income.
Accumulation Stage: Income or gains generated within the investment are subject to taxation as per applicable rates.
Withdrawal Stage: Upon maturity or withdrawal, the accumulated corpus, including the principal and gains, becomes tax-exempt.
Examples of ETE investments include certain life insurance policies and savings in fixed deposits (under specified conditions).
Important Keyword: Income Tax, Tax Benefits, Tax Benefits for Senior Citizens.
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Tax benefits for Senior Citizen and Super Senior Citizen
As individuals approach their retirement years, securing a reliable source of income becomes paramount. Recognizing this, the government has introduced several incentives aimed at providing tax relief to senior citizens. Senior and super-senior citizens typically derive income from various sources such as pensions, fixed deposits, interest on savings, rental income, and more. This article aims to elucidate the different facets of tax benefits available to senior and super-senior citizens.
Senior citizens, typically those aged 60 years or above but below 80 years, are eligible for specific tax concessions under the Income Tax Act. These concessions include higher exemption limits for income tax, allowing them to retain more of their income. Additionally, they benefit from reduced tax rates on specified incomes, ensuring a lighter financial burden in their retirement years.
Super-senior citizens, aged 80 years or above, enjoy even more substantial tax benefits. They often have higher exemption limits and may qualify for additional deductions, making their income more tax-efficient. These measures are designed to support elderly individuals in managing their finances and maintaining a comfortable standard of living during their retirement.
Tax Benefits available to Senior and Super Senior citizens
Senior citizens and super senior citizens in India enjoy a range of tax benefits designed to support their financial well-being during retirement. Here’s a detailed overview of these benefits:
Standard Deduction
Senior citizens (aged 60-80 years) with pension income can claim a standard deduction of INR 50,000 from their taxable income. This deduction is applicable if pension income is categorized under Salary Income while filing Income Tax Returns (ITR).
Exemption on Interest Income (Section 80TTB)
Senior citizens can claim a deduction on interest income up to INR 50,000 from various sources:
Interest from bank deposits (savings, fixed deposits, recurring deposits)
Interest from co-operative society deposits
Interest from Post Office deposits (savings, NSC, Senior Citizens Savings Scheme, Time Deposits, 5-year recurring deposits, and monthly income schemes)
If the interest income exceeds INR 50,000, TDS (Tax Deducted at Source) is applicable. However, senior citizens can submit Form 15H to avoid TDS deduction. This deduction is available only under the Old Tax Regime.
Exemption on Health Coverage and Medical Expenditure (Section 80D and 80DDB)
Under Section 80D, senior citizens can claim up to INR 50,000 as a deduction on health insurance premiums paid, enhancing their health coverage scope. Additionally, under Section 80DDB, a deduction of INR 1,00,000 is available for expenses incurred on specified diseases. These deductions are applicable only under the Old Tax Regime.
No Advance Tax Requirement
Senior and super senior citizens are exempt from paying advance tax if their income does not include earnings from business or profession. They only need to pay Self-Assessment Tax after calculating their final tax liability for the financial year.
Exemption from ITR Filing
Senior citizens above 75 years are not required to file Income Tax Returns (ITR) if:
Their income comprises only pension and interest income from the same bank where they receive pension.
They have submitted a declaration to the bank (under section 194P) for TDS deduction on interest income.
Offline ITR Filing for Super Senior Citizens
Super senior citizens (above 80 years) have the option to file their ITR offline for ITR-1 and ITR-4 forms, providing them with convenience in tax compliance.
Exemption on Reverse Mortgage
Senior citizens can benefit from tax exemptions under the reverse mortgage scheme. This scheme allows them to mortgage their property and receive periodic payments, which are exempt from taxation. They retain ownership of the property as long as they reside in it.
Income Tax Slab Rates under Old Regime
For Senior Citizens
Income(INR)
Tax Rate
Health & Education Cess
up to 3,00,000
Nil
Nil
3,00,001 to 5,00,000
5%
4%
5,00,001 to 10,00,000
20%
4%
more than 10,00,000
30%
4%
For Super Senior Citizens
Income(INR)
Tax Rate
Health & Education Cess
up to 5,00,000
Nil
Nil
5,00,001 to 10,00,000
20%
4%
more than 10,00,000
30%
4%
Surcharge for Senior and Super Citizens
Total Income (INR)
Rate
> 50 Lakhs
10%
> 1 Crore
15%
> 2 Crore
25%
> 5 Crore
37%
Income Tax Slab Rates under New Regime
Under the new tax regime, the health and education cess as well as surcharge rates will remain the same. The only changes are for income slabs and tax rates.
Important Keyword: Income Tax, Tax Benefits, Tax Benefits on Health Insurance.
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Tax Benefits on Health Insurance
The rising expenses associated with medical care are a significant concern for everyone. Health insurance plays a crucial role in mitigating these costs, shielding individuals from financial burdens that could otherwise be overwhelming. By paying a modest premium, individuals can secure themselves against unforeseen medical emergencies, alleviating the strain of hefty out-of-pocket expenses.
Typically, a basic health insurance policy covers essential expenditures such as hospital stays, surgeries, and routine medical examinations. In addition to providing financial security, the government incentivizes health insurance through tax benefits. These incentives aim to encourage more people to avail themselves of health insurance, thereby fostering a healthier population and reducing the overall burden on public healthcare services.
Exemption on Health Insurance Premium
Individuals and Hindu Undivided Families (HUFs) can benefit from a tax deduction under Section 80D of the Income Tax Act for premiums paid towards health insurance. This deduction applies when the insurance policy covers oneself, spouse, dependent children, and dependent parents. The amount deductible varies based on who is paying the premium.
This provision encourages individuals to prioritize health insurance, thereby reducing the financial burden associated with medical expenses. It’s important to understand that the tax benefit is structured to accommodate different family compositions and financial situations. By availing of this deduction, taxpayers not only secure their family’s health but also optimize their tax planning strategy.
Premium Paid For
Deduction Amount (INR)
Self, Spouse, and children (All members < 60 years)
25,000
Self, Spouse and Children + Parents (All members < 60 years)
50,000 (25,000 + 25,000)
Self, Spouse and Children + Parents (Others < 60 years and Parents > 60 years)
75,000 (25,000 + 50,000)
Self, Spouse and Children + Parents (All eldest members > 60 years)
1,00,000 (50,000 + 50,000)
In the domain of Indian income tax regulations, certain provisions exist to alleviate financial burdens associated with health-related expenses and disabilities. Here’s a simplified breakdown:
Deductions for Preventive Health Checkups (Section 80D):
Taxpayers can avail deductions for expenses incurred on preventive health checkups under Section 80D. The maximum deduction allowed is INR 5,000. It’s important to note that these expenses are part of the overall limit applicable for health insurance premiums. Therefore, they cannot exceed the premium limits.
Exemption for Individuals with Disabilities (Section 80U):
Individuals who are classified as disabled, with a disability ranging from more than 40% to less than 80%, can claim a deduction under Section 80U. For such individuals, the deduction amount is INR 75,000. For those considered severely disabled, with a disability exceeding 80%, the deduction amount increases to INR 1,25,000.
Exemption on Treatment of Critical Illnesses (Section 80DDB):
Section 80DDB allows residents and Hindu Undivided Families (HUFs) to claim deductions for expenses incurred on specified critical illnesses. If the taxpayer is below 60 years old, the deduction limit is INR 40,000. For those aged 60 years and above, the limit rises to INR 1,00,000.
Exemption on Maturity Amount (Section 10(10D)):
Maturity amounts received from life insurance policies are generally tax-exempt under Section 10(10D) if certain conditions are met:
For policies issued after April 1, 2012, the premium paid should be less than 10% of the sum assured.
For policies issued before April 1, 2012, the premium paid should be less than 20% of the sum assured.
Policies issued after April 1, 2013, are also covered under this exemption, but the premium should be less than 15% of the sum assured. This exemption applies specifically to individuals who have disabilities or specified diseases under Sections 80U and 80DDB, respectively.
Tax Deduction at Source (TDS) on Life Insurance Policy (Section 194DA):
If the maturity amount or any bonus payment from a life insurance policy exceeds INR 1 lakh and is not exempt under Section 10(10D), the insurer deducts TDS at a rate of 5% under Section 194DA before making the payment. However, if the amount is less than INR 1 lakh, no TDS is deducted, although the amount is still taxable.
