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PMVVY vs SCSS which is better for retirement planning. While both the investment options are specifically designed for retirement planning they both differ on many aspects. In this article, we have covered the differences and similarities among both the investments option.
What is Pradhan Mantri Vaya Vandana Yojana (PMVVY)?
Pradhan Mantri Vaya Vandana Yojana is a non-linked and non-participating pension scheme. PMVVY is a subsidised Yojana provided by the Government of India. The scheme offers a regular and fixed income with a flexibility to decide the payout frequency as monthly, quarterly, half-yearly, or yearly. The rate of return is assured and reviewed by the Ministry of Finance, Government of India at the beginning of every year. The scheme is a better alternative to parking your money in a savings bank account. The scheme has a policy term of 10 years. However, you can exit from the policy anytime. In a way PMVVY is a free lock-in period yojana and provides a higher liquidity..
An individual who is above the age of 60 years and a resident of India can invest. No limit on the maximum age of the investor. PMVVY is a yojana that is best suited for a senior citizen who wishes to earn an assured return on a regular basis along with insurance benefits. Further, you can avail a loan against the policy after 3 years up to 75% of the purchase price. The investment amount in the scheme is the purchase price.
The last date to invest in PMVVY is 31st March 2023. From April 1st 2023, the PM Vaya Vandana Yojana is set to close.
What is a Senior Citizen Savings Scheme (SCSS)?
Senior Citizens Savings Scheme (SCSS) is a post office savings scheme. The Ministry of Finance, Government of India regulates the scheme. SCSS is provided by the Post Office of India. Since, the scheme is backed by the Ministry of Finance, Government of India the scheme falls under low risk investments. The Ministry of Finance, Government of India reviews the rate of return regularly. The rate of return is assured and is not subject to change during the period except revision by the Government of India.
The SCSS scheme is suitable for senior citizens who wish to earn a regular income at a low risk and save tax. An investment in the scheme is eligible for a tax deduction under section 80C of the Income Tax Act, 1961. However, the interest income is taxable under the head ‘Income From Other Sources’ at the tax slab applicable to the investor. The lock-in period is 5 years and you can extend the tenure for another 3 years. A premature withdrawal is allowed after the expiry of 1 year from the date of deposit. However, a penalty interest is applicable.The Post Office of India has partnered with many private banks and public sector banks. You can easily open your SCSS with any such bank as well.
Difference Between PMVVY Vs SCSS
PMVVY and SCSS differ from each other w.r.t. factors such as liquidity, lock-in period, extension, insurance benefits, loan facility, eligibility, taxation, etc.
The following are difference between PMVVY and SCSS you must consider before investing in any of the options:
| Particulars | PMVVY | SCSS |
| Policy/ Investment Term | 10 years policy term with assured pension | 5 Years with an option to extend for another 3 years |
| Return on Investment | 7.40% p.a. | 8.20% p.a. |
| Max Investment Amount | Rs. 15 Lakhs | Rs. 30 Lakhs |
| Taxability of Returns and Tax Deduction | Income is taxable under the head ‘Income From Other Sources’ at the applicable slab rate Not eligible | Income is taxable under the head ‘Income From Other Sources’ at the applicable slab rate Eligible for a tax deduction up to Rs 1.5 lakhs under section 80C |
| Payout of income | Monthly, quarterly, half-yearly, or yearly at the choice of the subscriber | Quarterly payout |
| Eligibility | An individual aged 60 years or more | An individual aged 60 years or more and a retired individual belonging to the age group of 55 years to 60 years investing their retirement benefits |
| Loan | You can avail a loan after 3 years up to 75% of the purchase price. PMVVY assures a loan facility for a future financial emergency | You cannot avail a loan or pledge your SCSS investment |
Similarities Between PMVVY and SCSS
Both PMVVY and SCSS are Government of India sponsored schemes best suitable for senior citizens looking for a regular income. The Ministry of Finance, Government of India regulates the rate of Interest for both the schemes. Both SCSS and PMVVY assure a monthly return along with an avenue to address the financial emergency that could arise in the near future.
Let us understand the similarities between PMVVY vs SCSS:
- Investment objective: Both the schemes offer assured returns periodically. Both the schemes are best suited for a senior citizen who wants to earn a regular income with guaranteed returns.
- Regulation: SCSS and PMVVY are regulated and backed by the Ministry of Finance, Government of India. Both are trusted by investors as they are provided by the GOI as a part of social security schemes in India.
- Minimum Investment: Under SCSS the minimum investment amount is Rs 1,000. Under PMVVY the minimum pension amount is Rs 1000 per month.
- Tax on Returns: The income is taxable under the head ‘Income From Other Sources’ at the applicable slab rate for the financial year to the investor or subscriber.
PMVVY and SCSS – Which is a better retirement option?
Both SCSS and PMVVY have their own pros and cons. They differ on a few parameters but at the same time both the schemes serve the same investment objective. Before investing you must understand these differences and similarities and then analyse. You must select the investment option that suits your investment parameters. In this article, we have explained SCSS vs PMVVY based on their differences to help you in making a well-informed investment decision.
Furthermore, it is no doubt a hard call to make between SCSS and PMVVY. You can invest in both the investment options as well. You can receive periodic payout at your own choice along with insurance benefits with PMVVY. Additionally, stay invested with SCSS for a quarterly income. However, making such investments would mean a surplus fund.
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Frequently Asked Questions
Yes, senior citizens can invest in both SCSS and PMVVY schemes. From April 1st 2023, the PMVVY scheme will be closed. Thus, investing before March 31st 2023 will enable senior citizens to invest INR 15 lakhs each across both schemes. Furthermore, from April 1st 2023, the maximum investment amount for SCSS has been increased from INR 15 lakhs to INR 30 lakhs.
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