The Life Insurance Corporation of India's Varishtha Pension Bima Yojana is a government subsidised scheme for Indian citizens aged 55 years and above in the Union Budget 2003-04.
The much-awaited scheme was finally unveiled on July 14.
Eligibility
- Indian citizens aged 55 years and above are eligible.
- Proof of age (school leaving certificate, driving license, passport) is required. If any of the standard methods of proving age is not available, then a self-declaration of one's age can be made on a stamp paper before a notary.
Benefits
- The scheme will provide an annual return of 9 per cent.
- The pensioner will get pension during his entire lifetime.
- Pension will be paid on a monthly -- or quarterly or half yearly or yearly -- basis, as desired by the pensioner.
- In the event of the pensioner's demise, the premium paid by him will be returned to the nominee.
Pension amount and premium
- Minimum pension will be Rs 250 and maximum pension will be Rs 2,000 per month.
- For a monthly pension of Rs 250, a one-time premium (payable in lump sum) of Rs 33,355 will have to be made. For a monthly pension of Rs 2,000, a one-time premium of Rs 277,490.
- If one opts for the maximum pension of Rs 2,000 a month, the one-time premium is reduced to Rs 266,670, a benefit of Rs 11,000.
- An investment of Rs 100,000 would give a pension of Rs 750 monthly.
- Premium to be paid by cheque, demand draft or banker's cheque payable on the branch of the bank which is member of the local clearing house.
Ceiling of maximum premium applies for family as a whole. (Family comprises spouse, minor children and dependents).
The difference between the actual yield earned by the LIC on the funds invested under the scheme and the assured return of 9 per cent would be reimbursed to the LIC by the government.
Taxation
The pension earned, however, is not tax-free. Tax payable by the pensioner will depend on the income slab s/he belongs to. This pension will be added to the other income, if any, and tax, if applicable, will be levied thereon.
The Union Budget for 2003-04 raised the tax rebate for senior citizens to Rs 20,000. As a result, their annual income of up to Rs 153,000 is now exempt from income tax.
In the case of senior citizens on pension the effective exemption limit would become Rs 183,000 because of the standard deduction of Rs 30,000.
They could get further relief by taking advantage of the tax rebate available under Section 88 of the Income Tax Act.
Self-declaration filed by senior citizens in regard to no deduction of tax at source is also accepted.
Where to get the form
The proposal form for the old-age pension scheme can be obtained at: http://www.licindia.com/lichome2/161proposalform.pdf
