Pradhan Mantri Vaya Vandana Yojana (PMVVY) and Senior Citizen Savings Scheme (SCSS) are preferable fixed income options for seniors. The Central government backs both schemes, and they offer better returns over the long term compared with other safe options.
But if seniors must select one between the two, which one should they opt for?
SCSS offers 7.4% rates, and the maximum amount a senior can invest is Rs15 lakh. The payout happens every quarter.
Also Read | Inside the mad scramble to comply with the new labour codes
The interest rates in PMVVY depends on the frequency of payout—whether the individual chooses monthly, quarterly, half-yearly, or yearly pension.
PMVVY is structured in such a way that the maximum annual pension should be Rs1.11 lakh. If pensioners opt for a monthly payout, the maximum pension they get is Rs9,250, and they will need to invest Rs15 lakh.
The maximum yearly payout is Rs1.11 lakh, and for this, seniors must invest Rs1,449,086. The rate works out to be between 7.4% and 7.66%, depending on the payment frequency.
Both the schemes are for those who are 60 and above. SCSS offers age relaxation in some cases. For example, retired employees above 55 years of age and below 60 years of age can invest in it, subject to the condition that investment should be made within one month of receipt of retirement benefits.
The maximum tenure for SCSS is five years, and for PMVVY, it’s 10 years. In both cases, accounts can be closed before maturity. In SCSS, seniors must pay a penalty for pre-closure. In PMVVY, a senior gets 98% of the purchase price.
The most significant difference between the two is the tax benefit. SCSS qualify for deduction under Section 80C. No tax deduction is available under PMVVY. The payout from PMVVY is also taxable. The interest income received from SCSS is eligible for tax deduction under Section 80TTB.
According to the section, a senior can get a deduction of Rs50,000 interest income earned from fixed deposits (from eligible banks).
In most aspects, SCSS scores over PMVVY. However, if you want a monthly payout, the latter is better.
