Kisan Vikas Patra

A large majority of India’s population cannot afford basic expenses. So, they often choose safe and risk-free saving schemes. Out of the 9 saving schemes offered by the post office, Kisan Vikas Patra is one. Introduced in 1998, it’s aim was to encourage financial planning in farmers. Now that it is open to the rest of the public, it has become a popular money-saving program.

It is best for those who are not comfortable with risk and are looking for assured returns. Sounds like you? This article brings you all the information you would need to decide if Kisan Vikas Patra is the best for you.

Features Of Kisan Vikas Patra 

1. All certificates issued between April 1, 2020, and June 31, 2020, will mature in 124 months (10 years and 4 months)

2. The least investment required is ₹1000 and further only in multiples of ₹100. There is no limit.

3. As of now, certificates are available in denominations of ₹1,000, ₹5,000,₹10,000, and ₹50,000.

4. India Post Offices and some select commercial banks like SBI, Axis Bank issue certificates.

5. On making the deposit, an identity slip is given, which can later be used to make a withdrawal or transfer request.

6. The Finance Ministry changes the interest rate every quarter, ranging from 7.8 to 7.3%. Currently, the interest rate is 6.9% compounded yearly.

7. The Finance Ministry can also change the maturity period. The maturity period for each KVP holder is printed on their certificate.

8. KVP is transferable from one person and one institution to another.

Types Of Certificates Issued In KVP

i. Single holder type certificate: Certificate issued to an adult for themselves or in the name of a minor. Minors are also eligible for this certification.

ii. Joint A type certificate: Certificate issued to two adults that have invested in this scheme together. Upon maturity, the amount is paid to both holders together or to the survivor in the account of death.

iii. Joint B type certificate: Certificate issued to two adults that have invested in scheme together. Upon maturity, the amount is paid to either one of the holders. In the account of death, the amount is paid to the surviving holder.

Who Should Invest In KVP?

This investment is best for those who are against taking risks and are looking for safe returns. It enables them to park their extra and unused money safely. Due to a large number of Post Offices in the country, this scheme can reach the majority of the public. It also makes it very easy for the rural sector of India to access it.

Indian citizens above the age of 18 can buy a Kisan Vikas Patra. Hindu Undivided Families (HUF) and Non-Resident Indians (NRI) are unable to buy it.

Benefits Of Kisan Vikas Patra KVP

1. Risk-free investment: It is independent of market risks and fluctuations, making it a reliable investment. The simplicity and availability make this investment a much-preferred savings option. It is a government-backed scheme that offers guaranteed returns.

2. Ease and affordability: This saving scheme is easy to enroll in and is well suited for urban and rural investors. As Post offices issue these certificates, they help promote savings in rural areas. Its limited documentation and simple procedures make this a simple and easy investment. It’s no maximum limit feature that also makes it a flexible investment.

3. Compounding interest: The current interest rate is 6.9% compounded annually. The individuals will receive more returns on their investment since it is compounded.

4. Tenure: Currently, the tenure is 124 months. After completing this period, this scheme matures, and the holder becomes a KVP holder. This investment is more forward-looking and long-term oriented, with the investment period extending up to 10 years and 4 months.

5. Taxation: This scheme is not tax-deductible under Section 80cc. But, Tax Deducted at Source (TDS) is not applied post maturity period.

6. Loans against a certificate: The KVP certificate acts as collateral, allowing holders to avail of a loan or security. It can also help negotiate interest rates on loans.

7. Risk-free investment: It is independent of market risks and fluctuations, making it a reliable investment. The simplicity and availability make this investment a much-preferred savings option. It is a government-backed scheme that offers guaranteed returns.

8. Ease and affordability: This saving scheme is easy to enroll in and is well suited for urban and rural investors. As Post offices issue these certificates, they help promote savings in rural areas. Its limited documentation and simple procedures make this a simple and easy investment. It’s no maximum limit feature that also makes it a flexible investment.

9. Compounding interest: The current interest rate is 6.9% compounded annually. The individuals will receive more returns on their investment since it is compounded.

10. Tenure: Currently, the tenure is 124 months. After completing this period, this scheme matures, and the holder becomes a KVP holder. This investment is more forward-looking and long-term oriented, with the investment period extending up to 10 years and 4 months.

11. Taxation: This scheme is not tax-deductible under Section 80cc. But, Tax Deducted at Source (TDS) is not applied post maturity period.

12. Loans against a certificate: The KVP certificate acts as collateral, allowing holders to avail of a loan or security. It can also help negotiate interest rates on loans.

Steps To Avail A KVP Certificate

When you have finally gathered your money, your next step would be to get a certificate. The steps to get a KVP certificate are-

1. Fill out the application form, Form A, which is available online, post offices, or select banks.

2. Submit the form at a post office or bank that offers this scheme.

3. Show basic identification in the form of ID and copy proof of address. Extra information is required for deposits of higher denominations,

• For investments exceeding ₹50,000, PAN card proof is compulsory.
• For investments exceeding 10 Lakhs, income proofs in bank statements, salary slips, etc. are needed.

4. The certificate is then availed on the spot if the deposit is in cash. If made through a cheque or demand draft, then the certificate is sent through the mail.

Steps To Withdraw Your KVP Deposit

KVP deposit can be withdrawn from the same institution (post office or bank) where it was granted. But also from other branches in case of a special request.

The account holder can choose to withdraw their KVP deposit before or after maturity.

Before Maturity

If the deposit is-

• withdrawn within 1 year, the holder receives no interest and has to pay the penalty as per regulations.
• withdrawn between 1 to 2.5 years, the holder would receive interest, but a low one.
• withdrawn after 2.5 years, the holder would receive the promised interest.

After Maturity

If the amount reaches maturity, then the holder’s deposit will be double.

Transferring Your KVP Certificate

Kisan Vikas Patra certificate can be transferred in the following circumstances-

• From the deceased holder to their heir
• From the holder to the court of law or any individual if ordered by the court of law.
• From one joint holder to the other joint holder
• From a single holder to joint holders
• From joint holders to a single holder
• From single or joint holders to another individual

Transferring of certificates is only done by the postmaster or the bank officer. The transfer can only be made after a year from the purchase date. A certificate held by or meant for a minor cannot be transferred.

KVP Vs Other Money-Saving Schemes

One should only invest in money-saving schemes if it meets their needs. Thus, it is important to compare KVP with other saving schemes offered by the government.

There are nine types of small saving schemes, all unique to help meet various people’s needs. They are revising the interest rates applicable to them every quarter.

Kisan Vikas Patra Vs Fixed Deposit

• Investment: KVP requires the least investment of ₹1000 and no upper limit. FD requires a minimum deposit of ₹50 and no limit.
• Interest rate: KVP offers an interest rate of 6.9% and while the FD interest rate varies at different banks. At some banks, the highest is 8%, and the lowest is 3.25%.
• Maturity period: KVP’s maturity period exceeds FD’s by only 4months.
• Taxation-Returns on KVP are taxable while FD returns below 1.5 Lakh are not.
• Premature Withdrawals: One can withdraw their KVP deposits early but endure a penalty or low-interest rates. At the same time, FD allows withdrawals after 7 days from deposit without any problem.

Kisan Vikas Patra Vs National Savings Certificate

• Investment-KVP requires a minimum investment of ₹1000 and no upper limit. NSC requires a minimum deposit of ₹100 and an upper limit of 1.5 Lakh.
• Interest rate- KVP offers a 6.9% rate, and while the NSC interest rate varies at different banks, the average rate is 6.8%.
• Taxation- Returns on KVP are taxable while NSC returns are not.
• Premature Withdrawals: One can withdraw their KVP deposits early but endure a penalty or low-interest rates. At the same time, withdrawals on NSC are quite difficult.
• Loans- Both KVP and NSC can be used as a guarantee to take loans.

Kisan Vikas Patra Vs Public Provident Fund

• Investment-KVP requires a minimum investment of ₹1000 and no upper limit. PPF requires a minimum deposit of ₹500 per year and allows a maximum deposit f 1.5 Lakh per year.
• Interest rate- KVP offers a 6.9% rate, and PPF offers an interest rate of 7.1%.
• Maturity Period: KVP matures in 10 years and 4 months, and PPF matures in 15 years.
• Taxation- Returns on KVP are taxable, while PPF returns of a maximum of 1.5 Lakh are exempted from taxes under section 80C.
• Premature Withdrawals: One can withdraw their KVP deposits early but endure a penalty or low-interest rates. Whereas withdrawals on PPF are not possible
• Loans- Both KVP and PPF can be used as security to take loans.

FAQs

Conclusion

We recommend that you should think about parameters like budget, income, and need to make your choice. This article has all the knowledge of Kisan Vikas Patra. We hope that this will help you decide whether you should invest in KVP.