PMVVY Is Closed. Rs 9,250/Month on Rs 15 Lakh at 7.4%. Here Is Everything Existing Holders Need to Know — and What New Retirees Should Buy Instead.
PM Vaya Vandana Yojana closed for new subscriptions on March 31, 2023. The government did not extend it in Budget 2024, Budget 2025, or Budget 2026. If you are reading this hoping to invest, you cannot. If you already hold a PMVVY policy, this guide covers exactly what happens at maturity, the tax treatment most people get wrong, and the one mistake to avoid with the loan facility.
For the combined SCSS + PMVVY + MIS deployment strategy, see our guaranteed income strategy for retirees. For retirees looking to build a fresh guaranteed income floor today, the SCSS playbook is the starting point.
Current Status: Scheme Closed, No Revival Expected
PMVVY was always a time-limited subsidy scheme, not a permanent product. The government bore the difference between LIC’s actual return on the invested corpus and the guaranteed pension rate. This subsidy cost made it unsustainable as a permanent offering.
Timeline:
| Phase | Plan Number | Period | Guaranteed Rate | Status |
|---|---|---|---|---|
| Phase 1 | Plan 842 | May 2017 - Mar 2020 | 8.0% p.a. | Closed. First maturities in May 2027 |
| Phase 2 | Plan 856 | May 2020 - Mar 2023 | 7.4% p.a. | Closed. Maturities between 2030-2033 |
| Phase 3 | — | — | — | Never launched. No Budget allocation |
The government’s signal was clear: in the same Budget 2023 session that let PMVVY expire, it doubled the SCSS limit from Rs 15 lakh to Rs 30 lakh. SCSS at 8.2% with higher limits effectively replaced PMVVY at 7.4% with lower limits.
Rate History and Pension Amounts
PMVVY’s rate is fixed for the full 10-year tenure at the time of purchase. Unlike SCSS (which is reset quarterly for new investors), your PMVVY rate never changes once locked in.
Pension Amounts at Rs 15 Lakh (Maximum Investment)
| Pension Mode | Phase 1 (8.0%) | Phase 2 (7.4%) |
|---|---|---|
| Monthly | Rs 10,000 | Rs 9,250 |
| Quarterly | Rs 30,000 | Rs 27,750 |
| Half-yearly | Rs 60,000 | Rs 55,500 |
| Yearly | Rs 1,20,000 | Rs 1,11,000 |
Important change from 2020: The Rs 15 lakh limit was changed from per family (Phase 1) to per senior citizen (Phase 2). Both husband and wife can invest Rs 15 lakh each, creating a combined Rs 30 lakh PMVVY allocation generating Rs 18,500 per month (at 7.4%).
Minimum Investment
| Pension Mode | Minimum Purchase Price |
|---|---|
| Monthly | Rs 1,62,162 |
| Quarterly | Rs 1,61,074 |
| Half-yearly | Rs 1,59,574 |
| Yearly | Rs 1,56,658 |
Tax Treatment: The Myths That Need to Die
This section exists because at least half the PMVVY articles online get the tax treatment wrong. Some claim it is tax-free. Others say the purchase price qualifies for 80C. Neither is true.
What Is Actually True
| Tax Aspect | Reality |
|---|---|
| Pension income | Fully taxable at your slab rate |
| Section 80C on principal | Not eligible. Zero deduction on purchase price |
| TDS by LIC | Not deducted. This is why people think it is tax-free |
| GST on premium | Exempt. No GST charged on PMVVY purchase price |
| 80TTB deduction | Available — Rs 50,000 per senior citizen under old regime only |
| Income head | Reported under Income from Other Sources |
The Tax-Free Myth Explained
LIC does not deduct TDS on PMVVY pension payments. Many policyholders never see a tax deduction and assume the income is tax-free. It is not. The absence of TDS is simply because PMVVY is classified as a pension product, not an interest-bearing deposit. You are legally required to declare every rupee of PMVVY pension in your ITR.
The 80C Myth Explained
PMVVY is not a life insurance policy in the traditional sense. It is a pension scheme with guaranteed purchase price return. The PMVVY notification explicitly excludes it from Section 80C eligibility. Compare this with SCSS, where the principal investment qualifies for 80C deduction up to Rs 1.5 lakh. This is a significant disadvantage — on Rs 15 lakh invested in SCSS versus PMVVY, you save Rs 46,800 in tax (at 30% + cess bracket) that PMVVY holders miss entirely.
Actual Tax Calculation: PMVVY Rs 15 Lakh
| Item | Old Regime (60-80 age) | New Regime |
|---|---|---|
| Annual PMVVY pension | Rs 1,11,000 | Rs 1,11,000 |
| 80TTB deduction | Rs 50,000 | Not available |
| Taxable pension | Rs 61,000 | Rs 1,11,000 |
| Basic exemption (if only income) | Rs 3,00,000 | Rs 12,00,000 |
| Tax payable (standalone) | Nil | Nil |
For most senior citizens with PMVVY as part of larger retirement income, the Rs 1,11,000 PMVVY pension pushes them into higher taxable territory. The 80TTB deduction (old regime only) shelters Rs 50,000 of this. Under the new regime, PMVVY pension is taxed at full slab rate but the higher Rs 12 lakh zero-tax threshold under Section 87A provides relief for retirees with moderate total income.
Premature Exit: Only for Critical Illness
PMVVY is locked for 10 years. Premature surrender is allowed only if:
- The policyholder needs treatment for critical/terminal illness, OR
- The spouse needs treatment for critical/terminal illness
The penalty is 2% of the purchase price:
| Purchase Price | Penalty (2%) | Amount Returned |
|---|---|---|
| Rs 15,00,000 | Rs 30,000 | Rs 14,70,000 |
| Rs 10,00,000 | Rs 20,000 | Rs 9,80,000 |
| Rs 5,00,000 | Rs 10,000 | Rs 4,90,000 |
What does NOT qualify for premature exit:
- Financial hardship
- Wanting to switch to SCSS at a higher rate
- Need for funds for children’s expenses
- Property purchase
If you hold PMVVY and desperately want to exit to move to SCSS, you cannot — unless you or your spouse has a critical illness. This is the 10-year lock-in risk that many policyholders did not fully appreciate at purchase.
The Loan Trap: 75% at 9.5% Is a Terrible Deal
After completing 3 policy years, PMVVY policyholders can borrow up to 75% of the purchase price from LIC.
| Parameter | Details |
|---|---|
| Loan eligibility | After 3 completed policy years |
| Maximum loan | 75% of purchase price |
| Loan on Rs 15 lakh policy | Rs 11,25,000 |
| Loan interest rate | 9.5% p.a. |
| Annual loan interest cost | Rs 1,06,875 |
| Annual pension from full policy | Rs 1,11,000 |
| Net income after loan interest | Rs 4,125/year (Rs 344/month) |
Read those last two lines again. If you take the maximum loan, your Rs 15 lakh investment effectively earns Rs 344 per month. The negative carry (9.5% loan cost minus 7.4% pension rate = 2.1%) destroys the entire purpose of the scheme.
When the loan makes any sense: Only for very short-term emergencies (under 6 months) where you repay quickly. Even then, a personal loan from a bank at 10-12% might be cheaper when you factor in that repaying the PMVVY loan restores full pension income immediately rather than having loan interest continuously deducted.
Loan interest is deducted from pension. LIC does not send a separate bill. Your monthly Rs 9,250 pension drops to approximately Rs 344 until the loan is repaid.
Death Benefit: Purchase Price Returns, Pension Stops
| Scenario | Payout |
|---|---|
| Death during policy term | Full purchase price to nominee |
| Pension continuation to spouse | No — pension stops immediately |
| Accrued unpaid pension | Paid to nominee (pro-rata from last pension date to death) |
| Death claim process | Policy document + death certificate + nominee ID proof |
| Settlement time | 30-60 days typically |
Critical difference from SCSS: SCSS also pays full principal to nominee on death, but SCSS interest accrues at the full 8.2% rate until the date of death (then drops to savings account rate). PMVVY pays the pension amount proportionally until the death date. Both schemes return full principal on death, but neither continues income to the surviving spouse as an ongoing pension.
Free-Look Period
If you purchased PMVVY and regretted it, the free-look period was 15 days for offline purchases and 30 days for online purchases. This window has no relevance for existing policyholders, but it is worth noting for historical completeness.
PMVVY vs Alternatives: The 2026 Comparison
| Feature | PMVVY (Existing) | SCSS | RBI FRSB | Post Office MIS |
|---|---|---|---|---|
| Interest rate | 7.4% (locked) | 8.2% (locked at purchase) | 8.05% (floating) | 7.4% (locked at purchase) |
| Max investment | Rs 15L per person | Rs 30L per person | No cap | Rs 9L per person |
| Lock-in | 10 years | 5 years (+3 extension) | 7 years | 5 years |
| Section 80C | No | Yes (up to Rs 1.5L) | No | No |
| Premature exit | Critical illness only, 2% penalty | After 1 year, 1-1.5% penalty | After 4 years (with penalty by age) | After 1 year, 1-2% penalty |
| Monthly income on Rs 15L | Rs 9,250 | Rs 10,250 | Rs 10,062 (approx) | Rs 9,250 |
| Availability | Closed | Open | Open | Open |
| Where to buy | LIC only | Banks + Post offices | Banks | Post offices |
SCSS wins on every dimension — rate, limit, flexibility, tax benefit, and availability. This is not a close call.
For a deep dive on deploying the full Rs 30 lakh SCSS limit, see the SCSS retirement playbook. For comparing monthly income options including MIS and SWP, see the POMIS vs SWP showdown.
What Existing PMVVY Policyholders Should Do
If You Hold a Phase 1 Policy (Plan 842, 8.0%)
Your policy matures between May 2027 and March 2030 depending on your purchase date. At maturity:
- You receive Rs 15 lakh (or your purchase price) back in full
- No renewal or extension is possible — the scheme is closed
- Immediately deploy into SCSS at the prevailing rate. Current 8.2% is higher than your PMVVY 8.0%, plus you gain 80C benefit
- If you have already maxed SCSS at Rs 30 lakh, consider RBI Floating Rate Savings Bonds at 8.05%
Do not let the maturity amount sit idle. Even one month in a savings account at 2.5-3% instead of SCSS at 8.2% costs approximately Rs 725 on Rs 15 lakh.
If You Hold a Phase 2 Policy (Plan 856, 7.4%)
Your policy matures between 2030 and 2033. You are locked in at 7.4% while SCSS currently pays 8.2%. The rate differential costs you:
- Rs 1,000 per month (Rs 10,250 SCSS pension vs Rs 9,250 PMVVY pension on Rs 15 lakh)
- Rs 12,000 per year in lost income
- Rs 84,000 over the remaining 7 years (if purchased in 2023)
Can you exit to switch to SCSS? Only if you or your spouse has a critical/terminal illness. The 2% premature exit penalty (Rs 30,000) would be recovered in 30 months through the higher SCSS rate — but the exit condition makes this irrelevant for most holders.
Action plan for locked-in Phase 2 holders:
- Accept the 7.4% rate as your guaranteed floor
- Ensure your other retirement investments are in SCSS (if eligible) and RBI Floating Rate Savings Bonds
- Mark your maturity date and plan SCSS deployment 1 month in advance
- Review the retirement number guide to ensure PMVVY income fits within your broader plan
Couple Strategy for Existing Holders
If both spouses hold PMVVY at Rs 15 lakh each (Rs 30 lakh total), your combined pension is Rs 18,500 per month. This is a solid guaranteed income floor. But when policies mature, each spouse should independently open SCSS accounts:
- Spouse 1: Rs 15 lakh PMVVY maturity → Rs 15 lakh into SCSS = Rs 10,250/month
- Spouse 2: Rs 15 lakh PMVVY maturity → Rs 15 lakh into SCSS = Rs 10,250/month
- Combined: Rs 20,500/month (up from Rs 18,500) with 80C benefits
If either spouse has not yet invested in SCSS separately, that should happen today with other funds — do not wait for PMVVY maturity.
What New Retirees Should Do Instead of PMVVY
If you turned 60 in 2024, 2025, or 2026 and are looking to build a guaranteed income floor, here is the priority order:
Step 1: SCSS — Rs 30 Lakh at 8.2%
First and best option. Rs 20,500 per month, 80C eligible, 5-year lock-in with flexible exit after 1 year. Both spouses can invest Rs 30 lakh each. See the full SCSS playbook.
Step 2: RBI Floating Rate Savings Bonds — No Investment Cap at 8.05%
After maxing SCSS, deploy additional corpus here. Rate floats with NSC rate (currently 8.05%). No investment limit. 7-year lock-in. Semi-annual interest. Full details in our RBI FRSB guide.
Step 3: Post Office MIS — Rs 9 Lakh at 7.4%
Same rate that PMVVY offered, with a much shorter 5-year lock-in and flexible premature exit. Monthly payouts. Compare it against mutual fund SWPs in our POMIS vs SWP analysis.
Step 4: The Combined Strategy
Deploy across all three instruments for maximum guaranteed income. The SCSS + PMVVY + MIS strategy guide covers the exact allocation — substitute the PMVVY allocation with additional RBI FRSB or Post Office MIS.
What About LIC Annuity Plans?
LIC Jeevan Akshay (Plan 857) and Saral Pension are the market alternatives to PMVVY. But annuity rates for the “return of purchase price” option are 5.5-6.5% for a 60-year-old — far below SCSS at 8.2%. The “no return” option pays 8-9% but you lose your entire principal forever. Neither option comes close to the combination of SCSS + RBI FRSB for most retirees.
The Bottom Line
PMVVY was an excellent scheme while it lasted. The 8% rate in Phase 1 with guaranteed principal return was genuinely unmatched. Even the 7.4% Phase 2 rate with a 10-year lock on guaranteed returns had value in a falling-rate environment.
But the scheme is closed. For existing holders, the strategy is simple: hold until maturity, then move to SCSS. For new retirees, SCSS at 8.2% with Rs 30 lakh limit, 80C benefit, and 5-year lock-in is strictly superior to what PMVVY ever offered in Phase 2. The government made the right call — one better scheme at a higher rate beats two overlapping schemes at different counters.
Mark your maturity date. Have your SCSS application ready. Do not lose a single day of 8.2% income to a savings account.