Pradhan Mantri Pension Scheme, also known as the National Pension Scheme (NPS), is a voluntary, contributory pension scheme launched by the Indian government in 2004. The scheme aims to provide social security and financial stability to individuals during their old age by ensuring regular income streams. The scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
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Any Indian citizen between the ages of 18 to 65 years is eligible to apply for the Pradhan Mantri Pension Scheme. However, the applicant should have a valid bank account and a Permanent Account Number (PAN).
Types of Pradhan Mantri Pension Scheme
There are three types of pension schemes under Pradhan Mantri Pension Scheme:
1. Pradhan Mantri Vaya Vandana Yojana (PMVVY)
PMVVY is a pension scheme that offers a guaranteed return of 7.4% per annum for 10 years. The scheme is available to citizens aged 60 years and above. The minimum investment amount is Rs. 1.5 lakh, and the maximum investment amount is Rs. 15 lakh. The scheme also offers the option of premature exit in case of critical illness of self or spouse.
2. Atal Pension Yojana (APY)
APY is a pension scheme that offers a fixed monthly pension between Rs. 1,000 to Rs. 5,000 after the age of 60. The scheme is available to citizens between the ages of 18 to 40 years. The contribution amount varies based on the age and pension amount selected. The government also contributes 50% of the total contribution or Rs. 1,000 per annum, whichever is lower.
3. National Pension System (NPS)
NPS is a pension scheme that offers investment options in equity, debt, and government securities. The scheme is available to citizens between the ages of 18 to 65 years. The minimum investment amount is Rs. 500 per month or Rs. 6,000 per annum. The scheme offers two types of accounts: Tier 1 and Tier 2. Tier 1 account is the mandatory account, while Tier 2 account is optional.
The Pradhan Mantri Pension Scheme offers the following features:
1. Investment options
The scheme offers investment options in equity, debt, and government securities. The investor can choose their investment mix based on their risk appetite and financial goals. The returns on investment are market-linked, which means they may vary based on market conditions.
2. Withdrawal options
The scheme offers various withdrawal options to investors, such as lump sum withdrawal or annuity payment. The investor can choose the most suitable option based on their financial requirements.
3. Tax benefits
Investments in the Pradhan Mantri Pension Scheme are eligible for tax benefits under Section 80C of the Income Tax Act. Additionally, the maturity amount is also tax-free.
Comparison of PMVVY, APY, and NPS
While all three pension schemes under Pradhan Mantri Pension Scheme aim to provide financial security to individuals during their old age, they differ in their benefits and drawbacks.
1. Benefits and drawbacks
PMVVY offers a guaranteed return, which makes it a safer investment option. However, the returns are relatively lower compared to other schemes. APY offers a fixed pension amount, which is beneficial for individuals who require a regular income stream. However, the contribution amount increases with age, which may be a drawback for some investors. NPS offers investment options in equity, which can potentially provide higher returns. However, the returns are market-linked and subject to market risks.
2. Suitability for different age groups
PMVVY is suitable for individuals aged 60 years and above who require a regular income stream with low risk. APY is suitable for individuals between the ages of 18 to 40 years who require a fixed pension amount after the age of 60. NPS is suitable for individuals between the ages of 18 to 65 years who are willing to take market risks for potentially higher returns.
How to Apply
To apply for the Pradhan Mantri Pension Scheme, the applicant needs to submit the following documents:
- Identity proof (Aadhar card, PAN card, Voter ID, Passport, etc.)
- Address proof (Aadhar card, Passport, Utility bills, etc.)
- Age proof (Birth certificate, Passport, Aadhar card, etc.)
- Bank account details
The applicant can apply for the scheme online or offline. To apply online, they need to visit the PFRDA website and follow the instructions. To apply offline, they can visit any of the designated points of presence and submit the required documents.
The Pradhan Mantri Pension Scheme is an excellent initiative by the Indian government to provide financial security to individuals during their old age. While the scheme offers various benefits, it is essential to carefully analyze the benefits and drawbacks of each pension scheme before investing.
Can NRIs apply for Pradhan Mantri Pension Scheme?
No, NRIs are not eligible to apply for the scheme.
Is there any penalty for delayed payments?
Yes, a penalty of 1% per month will be charged for delayed payments.
Can one switch from one scheme to another?
Yes, one can switch from one scheme to another. However, there may be some restrictions based on the scheme selected.
Can one get a loan against the investment in Pradhan Mantri Pension Scheme?
No, loans are not available against the investment in the scheme.
Is Pradhan Mantri Pension Scheme available in all states of India?
Yes, the scheme is available in all states of India.