CA Chirag Chauhan

1. Introduction: Government of India in the Union Budget 2014-2015, announced the revival of Varishtha Pension Bima Yojana. Excerpts from budget speech by Honrable Finance Minister are, “NDA Government during its last term in office had introduced the Varishtha Pension Bima Yojana (VPBY) as a pension scheme for senior citizens. Under the scheme a total number of 3.16 lakh annuitants are being benefited and corpus amounts to Rs.6,095 Crore. I propose to revive the scheme for a limited period from 15th August 2014 to 14th August 2015 for the benefit of citizens aged 60 years and above”

LIC of India has been given the sole privilege to operate this scheme.

2. Benefits :

a. Pension Payment :

During the lifetime of Pensioner, a pension in the form of immediate annuity as per mode chosen by the Pensioner shall be payable.

b. Death Benefit:

On death of the Pensioner the Purchase Price shall be refunded.

3. Eligibility Conditions and Other Restrictions:

 i.      Minimum Entry Age:  60 years (completed)

 ii.      Maximum Entry Age:  No limit

a)     Minimum Pension:       Rs. 500/- per month

  1. Rs. 1,500/- per quarter,
  2. Rs. 3,000/- per half-year
  3. Rs. 6,000/- per year

b)    Maximum Pension:      Rs. 5000/- per month

  1. Rs. 15,000/- per quarter,
  2. Rs. 30,000/- per half-year
  3. Rs. 60,000/- per year

Ceiling of maximum pension is for a family as a whole i.e. total amount of pension under all the policies issued to a family under this plan shall not exceed the maximum pension limit. The family for this purpose will comprise of pensioner, his/her spouse and dependants.

 4. Payment of Purchase Price: The plan can be purchased by payment of a lump sum Purchase Price. The pensioner has an option to choose either the amount of pension or the Purchase Price.

The minimum and maximum Purchase Price under different modes of pension will be as under:

Mode of Pension Minimum Purchase Price Maximum Purchase Price
Yearly Rs. 63,960/- Rs. 6,39,610/-
Half-yearly Rs. 65,430/- Rs. 6,54,275/-
Quarterly Rs. 66,170/- Rs. 6,61,690/-
Monthly Rs. 66,665/- Rs. 6,66,665/-

The Purchase Price to be charged shall be rounded to nearest multiple of Rs.5/-.

5. Mode of pension payment:  The modes of pension payment are monthly, quarterly, half-yearly & yearly. The pension payment shall be through ECS/NEFT only.

The first instalment of pension shall be paid after 1 year, 6 months, 3 months or 1 month from the date of purchase of the same depending on the mode of pension payment i.e. yearly, half-yearly, quarterly or monthly respectively.

6. Sample Pension rates per Rs.1000/- Purchase Price

The pension rates for Rs.1000/- Purchase Price for different modes of pension payments are as below:

                                                              i.      Yearly:            Rs. 93.8069 p.a.

                                                            ii.      Half-yearly:     Rs. 91.7045 p.a.

                                                          iii.      Quarterly:        Rs. 90.6767 p.a.

                                                          iv.      Monthly:         Rs. 90.0000 p.a.

The pension instalment shall be rounded off to the nearest rupee.

These rates are not age specific.

7. Surrender Value: The policy can be surrendered aftercompletion of 15 years. The Surrender Value payable will be refund of Purchase Price. However, under exceptional circumstances, if the pensioner requires money for the treatment of any critical/terminal illness of self or spouse then the policy can be surrendered before the completion of 15 years and the Surrender Value payable shall be 98% of Purchase Price.

8. Loan: Loan facility is available after completion of 3 policy years. The maximum loan that can be granted shall be 75% of the Purchase Price.

The rate of interest to be charged for loan amount would be determined from time to time by the Corporation.

Loan interest will be recovered from pension amount payable under the policy. The Loan interest will accrue as per the frequency of pension payment under the policy and it will be due on the due date of pension. However, the loan outstanding shall be recovered from the claim proceeds at the time of exit.

9. Taxes: Taxes including Service Tax, if any, shall be as per the Tax laws and the rate of tax as applicable from time to time.

The amount of tax payable as per the prevailing rates shall be payable by the policyholder on Purchase Price. The amount of Tax paid shall not be considered for the calculation of benefits payable under the plan.

10. Free Look period: If a policyholder is not satisfied with the “Terms and Conditions of the policy, he/she may return the policy to the Corporation within 15 days from the date of receipt of the policy stating the reason of objections.

The amount to be refunded within free look period shall be the Purchase Price deposited by the policyholder after deducting the charges for Stamp duty.

11. Author Opinion-  The Rate of Interest which a senior Citizen earns on Nationalize Bank FD is around 9.75% . However there is limiting period of 10 years up to which you can make your Fix Deposit. Interest Rate scenario change depending upon Inflation and RBI policies. Expectation from RBI is softening of Interest rate going forward in coming years as growth picks up and inflation softens. So in next 5 to 10 years if interest rate comes down to 5 to 7% this Pension plan can be better way to block the interest rates @9.36%.and earn a steady 5000/- PM when you invest maximum amount. There is one time Service tax of 3.09% applicable on the premium amount. However considering interest rate scenarios and growing economy one can take benefit of the policy.

For any query you can write to Chirag@cachauhan.in . Before making any decisions do consult your Professional / tax advisor.  Author does not take any responsibility for misrepresentation or interpretation of act or rules. Neither the author nor the firm accepts any liability neither for the loss or damage of any kind arising out of information in this document nor for any action taken in reliance there on.

With Inputs from – LIC India Website

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One response to “Varishtha Pension Bima Yojana Details And Opinion”

  1. Chintan Shah says:

    Respected Sir

    Can pension received under this policy is taxable ??

  2. P R VENKATARAMAN says:

    My wife & myself are retired & living only on interest. Pls. help with detail/you can call me on my Mob.9920021870 any time. I heard that the scheme is closed on 14th August still if we can open pls.call me immly. Thanks.

  3. Prasad Koppuravuri says:

    Being not aware of this VARISHTHA PENSION BIMA YOJANA, I have invested Rs.1,20,000/- in LIC’s Jeevan Akshay-VI on 13.08.2014, which Scheme has only meager rates of annuity AND NO surrender value and loan options-under any circumstances. Very recently, I came to know about VPBY. Is there any possibility to upgrade/switch over of my Jeevan Akshay-VI to VPBY now? (i.e.before 14.08.2014). Please guide me.

    Address: NARASARAOPET-522601 (Andhra Pradesh) Mobile# 9440912784

  4. AVADHANULA HARI says:

    TO,
    HONOURABLE PRIME MINISTER OF INDIA, 29-5-2015,GUNTUR,AP.

    GOVT OF INDIA HAS REALISED AND WITHDRAWN THE SALES TAX 3.09% FOR VARISTHA BHIMA YOJANA PENSION POLICY. THIS EXEMPTION IS NOT EQUALLY GIVEN TO ALL. THIS INDISCRIMINATION AMONG SR CITIZENS OF THIS COUNTRY IS INJUSTICE AND ADHARMA TO THE MODI GOVT. THIS IS A SOCIAL SECURITY SCHEME TO OLD AGE PEOPLE AND THERE IS NO INSURENCE COVERAGE IN THIS POLICY.HENCE THIS IS NOT A BUSSINESS TYPE POLICY.THIS SCHEME LAUNCHED ON 15-8-2014 AND WILL BE CLOSED ON 14-8-2015. IT IS NOT FAIR TO DISCRIMIWENATE THE SR CITIZENS. SALES TAX MAY CHANGE FROM TIME TO TIME.BUT TO RECTIFY THE LACUNAE IN THIS SCHEME TOTALLY THIS SCHEME IS EXEMPTED FROM PAYING SALES TAX. WE REQUEST THE FINANCE MINISTER AND PRIME MINISTER TO DO EQUAL JUSTICE TO ALL THE POLICY HOLDERS OF THIS SCHEME.OTHER WISE IT IS NOT ONLY INJUSTICE BUT ADHARMA TO MODI GOVT.
    AVADHANULA HARI,SR CITIZEN)
    PH.NO.9949524191.

  5. Anil Punjani says:

    whether i will be entitle to get deduction under income tax when i invest amount in varisht pension bima yojna and if yes under which section of the income tax and what is the limit

  6. JOYDEV CHAKRABORTY says:

    Is there any Form for furnishing information & whom to apply for declaration about TDS & when?

  7. Mr.Dilip Patil says:

    Varistha Pension Bima Yojana – Re – launched fro the period – 15th August, 2014 to 14th August, 2015

    Eligibilty : 60 years of age and above.
    Benefit :
    During Life Time : Pension will be paid during the life time of the pensioner and will credited directly to the Bank account of Pensioners.
    a. Assured return of 9% monthly and 9.38% annually
    b. Pension payment option : Monthly, Quarterly, Half yearly and yearly.
    c. On demise of the pensioner, nominee receives the purchase price
    d. If the pensioner requires money for the treatment of any critical/terminal illness of self or spouse then the policy can be surrendered before the completion of 15 years and the Surrender Value payable shall be 98% of Purchase Price.
    e. 80C deduction not allowed on above Policy.

    Interrested please contact on my Mobile No.9322106449 or e-mail on advance_dilip@yahoo.co.in

    Dilip Patil

  8. Dhananjay Latkar says:

    I would be very much requiring this facility. It’s good scheme for Varishtha particularly for self employed and non Govt service peoples. One option to be seen fist 3 to 5 years yearly pension after 3 to 5 years monthly pension.
    Who will approach giving agency at Thane where my niece stays & I would be 1st customer of her LET’S KNOW.

  9. C.KRISHNARAO says:

    IN VARISHTA PENSION SCHEME NO LIFE RISK IS COVERED.EVEN THEN SERVICE TAX IS BEING CHARGED @3.09%.WHEN BANKS ARE NOT CHARGING ANY S.T. ON DEPOSITS OF LAKHS OF CRORES WHY LIC IS IMPOSING? SO.WHAT ARE THE INSTRUCTIONS RECEIVED TO LIC SO AS TO LEVY SERVICE TAX ON VARISHTA PENSION. IN ORDER TO ANSWER THE QUERRY PLEASE SEND A G.O.TO ME. ALREADY WE SOLD 2,00,000 VARISHTA FROM A RETIRED TEACHER BUT HE REFUSED TO PAY SERVICE TAX OF 6180 TO THE AGENT.A BIG QUARREL ARISED IN BOBBILI.FINALLY THE POLICY HOLDER SUBMITTED THE P.B. FOR CANCELLATION UNDER COOLING OFF.FRO C.KRISHNARAO LIC D.O. AND SBA BOBBILI PVP BRANCH 69B.VIZAG DIVN AP. 9440151855 ckraolic@gmail.com 08944 255439

  10. Ashwani Kumar Agrawal says:

    Sir, The Varistha Pension Yojna has service tax and the Pension is taxable.
    In my opinion, this is of no use for we retirees.Instead we may Invest in Some taxfree income like PPF etc.The VPY 9% is taxable and service Tax @ 3.09%on amount is deducted Which reduces 9% drastically.

  11. Abraham says:

    Sir, is the 80ccc benefits available in the Varishta Pension Bima Yojana.If available is it for 1.50-lac or 1-lac?

  12. Mr. Mohinder Singh says:

    WHAT IS THE PROCEDURE FOR IT CONTACT NO. 9911346346

  13. H.K.Ghosh says:

    3.09% of maximum lumpsum premium means one has to pay Rs. 6,87,265 /- to get monthly pension of Rs. 5000/- per month.
    This mean 8.73% interest; not 9.38% as advertised.
    Am I doing any mistake in understanding the Scheme ?

  14. N.N.Hazra says:

    Please let me know whether amount invested under LIC’s Varishtha Bima YOJANA is eligible for deduction under Section 80 C ?
    – See more at: http://taxguru.in/finance/varishtha-pension-bima-yojana-details-opinion.html#sthash.qFpM2JjI.dpuf

  15. nikhil kaushik says:

    isnt this article a re-hash of LIC website without giving credits? licindia.in/VARISHTHA_PENSION_BIMA_YOJANA_benefits.html

  16. Dr. Kamalendu Majumdar says:

    Please Note to get a pension 5000 per month means 60000 per year this the maximum you can get from this Varishtha Pension Bima Yojana one has to invest Rs. 6,66,665/- plus Service tax of 3.09% of the total amount (want to get monthly Rs.5000 as pension) , NO TAX RELAXATION

    Based on MARKET PLUS 1 (ONE) LIC UNIT LINK POLICY I HAVE INVEST IN THIS POLICY
    LIFE INSURANCE OF INDIA IS OME FORMAT OF SARADHA RUN BY SOME EDUCATED GETTING SALARY FROM THE GOVT UNDER TAKEN BUT DOING THE SAME THING LIKE THE GREAT OF WESTBENGAL “SUDIPTA SEN” THE NO 1 CHEATER OF WORLD
    SO
    LIC IS THE MODERATE VERSION OF SARADA CHEAT FUND RUN BY GOVT UNDERTAKEN

    SO DON’T INVEST Y0UR HARD EARN MONEY TO LIC

    GO FOR FIXED DEPOSIT WITH ANY NATIONALIZED BANK

    DR. KANALENDU MAJUMDAR IIT KHARAGPUR

  17. Pratap Chandra Patnaik says:

    Respected Sir,
    Plz suggest me what is the Varistha Pension Bima Yojana under LIC, whether is is different from PFRDA of Swabalamban scheme, My present age is 35 years then what amount i have to deposit for Varistha Pension Bima Yojana and approximately how much amount I will get pension.It’s my bad luck that our odisha chief Minister Sri Nabin Patnaik own four times as a CM but Still I worked as contracutal and not regularise, our cm has no mercy at all.i think our Prime Minster schemes for Jan Dhan Yojana is excellent and appriciated, thanks Modi Sir, many many…thanks.But I request u that modi sir should teach to our brain less CM Nabin patnaik.
    From
    Pratap Chandra Patnaik,
    MA(Sociology),MBA,MA(RD),DIH,DWED,CDM
    Rayagada,Odisha

  18. sundear says:

    pls contact 9840728160 for Varishtha Pension Bima Yojana Details And Opinion

  19. GANESAN.K says:

    Please let me know whether amount invested under LIC’s Varishtha Bima YOJANA is eligible for deduction under Section 80 C ?

    Pl reply to ganesan.k5455@gmail.com

  20. V SRINIVASAN says:

    mr promod can I invest as and when I get cash? for example-can I take three policies now and then when my Fd in a bank matures I want toinvest maximum of rs 6.7 lacs before aug14th 2015 pl reply tks VS

    • Pramod Mishra says:

      There is no tax rebate under 80C.
      Pension and Interest are taxable as per your income slab.
      @Ramamurthy: Individual has a maximum limit of getting pendion of 5000 per month or 60000 every year. You and your wife and take.
      @ V Srinivasan: Yes sir, u can take it in installment but pension should notbgo beyond the above specified limit.

      Regards,
      Pramod Mishra.

  21. Jeyabalan says:

    Please let me know whether amount invested under LIC’s Varishtha Bima YOJANA is eligible for deduction under Section 80 C ? –

  22. k k bhola says:

    hi,i am k k bhola,pl. let me know that the varishstha pensionbima yojna for the benefit of sr citizens,has been introduced on 14august2014.i have considered the fact given in details,what i found out that pension benefit are there but what about insurance factor.basically i found this equivalent to almost equal or less interests paid by banks to sr citizens.as the name ofscheme implies sympathy for sr citizin @ their families,then why in case of death of aperson,is not being paid according to the insurance rules of regulatory of india.should i assume that sr citizens of india are being made ullu,kindly hame ullu mat banana,thanks with regards.

  23. srinivas says:

    Please let me know whether amount invested under LIC’s Varishtha Bima YOJANA is eligible for deduction under Section 80 C ?
    Is the pension amount taxable or not. Pls. advise me so that i will advise my clients properly.

  24. Suresh says:

    Please let me know whether amount invested under LIC’s Varishtha Bima YOJANA is eligible for deduction under Section 80 C ?

  25. Mustafa says:

    Is the pension amount taxable or not. Pls. advise me so that i will advise my clients properly.

  26. Pramod Mishra says:

    Hi, Those who want the complete details or have any query on Varishtha Pension Bima Yojna, you can call or sms me at 8108892112.
    Regards,
    Pramod.

  27. MCT says:

    If this pension which would be received Income TAX FREE or taxable as per the slab rates ?

  28. Ramamurthy says:

    I am 85 and can I enter the Scheme.If so what is the onetime amount I have to pay to entitle me to a pension of Rs 15000 per month for life time?
    My wife is 78 and I want answers please?

  29. PANKAJ MAHESHWARI says:

    WHAT IS THE INCOME TAX IMPLICATION ON THIS ?

  30. pratik says:

    Pl.z suggest if the amt. paid to lic under this scheme is eligible for Income tax deduction under section 80
    m-8460722761

  31. sudarshana says:

    What about the investment entitlementf or tax rebate? And, weather the pension is taxable or not?

  32. ramani says:

    what about the flipside???Domestic factors may impact negatively – reasons could be many, political a la inter state disputes, climatic vagaries, policy continuum, growth induced inflation (a necessary evil, international geo / political / economic events including neighborhood disturbances. Yet, this could be a good option for those seeking simple and safe investment. This will be taxed in the hands of the recipient if the basic exemption is crossed.

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