Before you invest, see the difference between PMVVY and SCSS in terms of interest rate, tenure, frequency of interest payments etc
Pradhan Mantri Vaya Vandana Yojana (PMVVY) and Senior Citizens Savings Scheme (SCSS) are two popular investment options available to senior citizens. Many investors want to know as to which of these is better to invest in? While the maximum investment allowed under both the schemes is Rs 15 lakh individually, the duration of the scheme is different for each of them. Let us see the difference between PMVVY and SCSS in terms of interest rate, tenure, frequency of interest payments etc.
What makes it a unique investment for senior citizens is that unlike SCSS, the PMVVY is for 10 years. For 10 years, the regular pension in PMVVY is guaranteed by the government. In SCSS, the guaranteed pension is only for 5 years. SCSS can, however, be extended after maturity for 3 years but the prevailing rate of interest will apply. As interest rates are looking to go down further, PMVVY scores over SCSS in this context.
Rate of interest
To invest in PMVVY, one has to approach LIC and invest either offline or online from the LIC website.
If a senior citizen is undecided, investment in PMVVY can be made till March 31, 2020. However, in the case of SCSS, returns are fixed by the government at the start of every quarter of the financial year.
Currently, for the quarter ending December, the rate of interest on SCSS is 8.6 per cent per annum. On the interest rate front, SCSS scores higher as it carries a higher rate of interest than PMVVY.
In the case of PMVVY, the maximum monthly pension can be Rs 10,000. This is about 8 per cent on the maximum investment of Rs 15 lakh. As per the PMVVY features, the maximum pension can be Rs. 10,000 per month, Rs. 30,000 per quarter, Rs. 60,000 per half-year and Rs. 1,20,000 per year.
Frequency of payments
PMVVY is basically a pension scheme providing a regular income on a monthly, quarterly, half-yearly annual basis. In SCSS, the only option is to get quarterly returns. A senior citizen has to accordingly decide based on the individual requirement.
Who can open
In both PMVVY and SCSS, only senior citizens of age 60 years and above can invest, however, in SCSS someone who has retired under VRS or superannuation can also invest but only the retirement benefits can be invested in such a case.
The interest earned in both SCSS and PMVVY is taxable in the hands of the investor under the head ‘Income from Other Sources.’ SCSS, however, comes with tax benefit under section 80C thus scoring higher on the tax front compared to PMVVY.
After making a comparison between PMVVY and SCSS, rather than investing in any one of these two investment options, a senior citizen can consider investing in both PMVVY and SCSS. Do not consider one to be better than the other as requirements may differ. While the SCSS can be the first choice, a portion of the funds can also be invested for 10-years in PMVVY. Rest assured, both are backed by the government and carries a fixed return to meet regular income needs.