No service tax on Varishtha Pension Beema Yojana (VPBY) from 01/04/2015

Varishtha pension bima yojana

Its a good new for the senior citizen who are planning to buy the Varishtha Pension Beema Yojana (VPBY), from 01/04/2015 there will not be any service tax charged on this policy as announced by the Finance Minister Mr. Arun Jaitley in Union Budget 2015.  Earlier policy holder had to pay service tax at the rate of 3.09% ie Rs. 20600 on full amount of Rs. 666665 to get the monthly pension of Rs. 5000. This is a big relief for senior citizens and now a good scheme to invest the money and get a handsome returns.

Eligibility conditions and salient features of Varishtha Pension Beema Yojana

Minimum Entry Age:  60 years (completed)

Maximum Entry Age:  No limit

Minimum Pension: Rs. 500/- per month,  Rs. 1,500/- per quarter, Rs. 3,000/- per half-year, Rs. 6,000/- per year

Maximum Pension: Rs. 5000/- per month, Rs. 15,000/- per quarter, Rs. 30,000/- per half-year, 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

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 PensionMinimum Purchase PriceMaximum Purchase Price
YearlyRs. 63,960/-Rs. 6,39,610/-
Half-yearlyRs. 65,430/-Rs. 6,54,275/-
QuarterlyRs. 66,170/-Rs. 6,61,690/-
MonthlyRs. 66,665/-Rs. 6,66,665/-

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

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:

Yearly:            Rs. 93.8069 p.a.

Half-yearly:     Rs. 91.7045 p.a.

Quarterly:        Rs. 90.6767 p.a.

Monthly:         Rs. 90.0000 p.a.

The pension installment shall be rounded off to the nearest rupee. (These rates are not age specific.)

Benefits

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.

Death Benefit: On death of the Pensioner the Purchase Price shall be refunded.

2 Comments on "No service tax on Varishtha Pension Beema Yojana (VPBY) from 01/04/2015"

  1. prvnaggarwal@rediffmail.com' Parveen Kumar Aggarwal | October 11, 2015 at 7:34 pm |

    please quote reference or documents in which VPBY has been specifically subjected to service tax even after it being a debenture type security and without any risk coverage as well as the pension being drawn from the interest on the deposited amount is also subjected to income tax in the hands of the investor.

    • 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.
      The instructions regarding issues related to taxes will be issued by Finance & Accounts Department, Central office, separately.

      Please refer the product circular of Varishtha Pension Bima Yojana by following this link:
      http://insuranceblog.asia/wp-content/uploads/2015/10/Circular-of-VPBY_828-with-Annexure-1.pdf

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