Overview of Kisan Vikas Patra Scheme
Kisan Vikas Patra is an India Post initiative. Essentially a lucrative savings scheme, it was introduced in the year 1988 backed by government. It got quite a positive response in the initial months but later the Government of India formed a special commission under the command of Ms. Shayamla Gopinath. They strongly recommended to the government that this is a system that could be easily misused. Thus the Government of India reached a decision to scrap off the scheme altogether and did so in 2011. But the new Government formed in 2014 had another idea. They relaunched this scheme with slight alterations in the same year.
Features & Benefits of Kisan Vikas Patra:
- KVP can be bought by any Indian citizen with a regular income, jointly (with spouse) on on behalf of a minor.
- The money put in will be doubled in 8 years and 7 months.
- You can put in denominations of INR 1000, 5000, 10000 and 50000 with INR 1000 as the minimum deposit requirement.
- You can get one on behalf of a minor.
- KVP can be bought from any Post office.
- You can make use of the nomination facility.
- It can be easily transferred from one post office to another and individual to individual.
- Certificate you have can be cashed after two years and six months without penalty.
- A trust can apply for it provided that it meets the KVP guidelines.
- It is not designed for business institutions or NGOs.
Kisan Vikas Patra (KVP) Calculator
Kisan Vikas Patra interest is such that the value of the Kisan Vikas Patra grows twofold in a matter of mere eight years and seven months. The only hitch, albeit slight, is that the income thus assimilated from Kisan Vikas Patra interest will be taxed. But the applicable tax is not deducted at source and the entire amount can be availed by the account holder of the KVP. Investing in Kisan Vikas Patra is not accountable for wealth tax though. KVP interest rate entices the middle class depositor who are forever on the lookout of safe and transparent investment options such as these. You also have an online Kisan Vikas Patra calculator detailing the money you can earn in a stipulated time.
Kisan Vikas Patra (KVP) Calculator & Interest Rate Chart:
|KVP Calculator & Interest Rate Chart (Min INR 1000)|
|Year Wise Assimilated Returns||From 15 Jan 2000 to 28 Feb 2001||From 1 Mar 2001 to 28 Feb 2002||From 3 Mar 2002 to 28 Feb 2003||Post 1 March 2003|
|1st Year||Not Applicable||Not Applicable||Not Applicable||Not Applicable|
|2nd Year||Not Applicable||Not Applicable||Not Applicable||Not Applicable|
|2 Years & 6 Months||1246||1209||1195||1170.51|
|3 Years & 6 Months||1407||1327||1305||1267.19|
|4 Years & 6 Months||1585||1470||1439||1355.9|
|5 Years & 6 Months||1779||1644||1602||1488.49|
|6 Years & 6 Months||2000||1857||1800||1649.13|
|7 Years||Not Applicable||Not Applicable||1883||1713.82|
|7 Years & 3 Months||Not Applicable||2000||Not Applicable||Not Applicable|
|7 Years & 6 Months||Not Applicable||Not Applicable||Not Applicable||1781.06|
|7 Years & 8 Months||Not Applicable||Not Applicable||2000||Not Applicable|
|8 Years and 8 Years 7 Months||Not Applicable||Not Applicable||Not Applicable||1850.93|
|8 Years & 7 Months||Not Applicable||Not Applicable||Not Applicable||2000|
|More than above||Not Applicable||Not Applicable||Not Applicable||Not Applicable|
Kisan Vikas Patra (KVP):
Run by the Department of Posts, KVP is a small savings government scheme. It is considered very safe and is a long term investment option. The scheme was discontinued in 2011 but later relaunched in 2014.
KVP is of the following types:
- Single Holder Type Certificate – This type of certificate is issued to an adult for himself/herself or on behalf of a minor, or to a minor.
- Joint A Type Certificate – This type of certificate is issued jointly to two adults payable to the survivor or both the holders.
- Joint B Type Certificate – This type of certificate is issued jointly to two adults to the survivor or both holders.
Only resident Indians can invest in this instrument, while NRIs cannot open a KVP account. Even HUF is not eligible for investing in Kisan Vikas Patra.
Interest individual must submit an application Form A or A1 either personally or through a small savings scheme agent, in order to purchase this instrument. Form A with no background colour, is used in case you are investing directly. Form A1 with coloured background, is used if investment is made by the agent on your behalf. If payment towards KVP is made through cash, it is issued immediately. However, if the payment is done through DD or cheque or pay order, the issuance is on the day the payment is cleared. You must request for Identity Slip at the time of issue of certificate of the instrument as it can be useful in case of loss of certificate or for easy processing of payment at maturity.
Salient Features of Kisan Vikas Patra (KVP):
The important features of KVP are:
- Amount invested through KVP can be doubled in 8 years and 4 months (100 months).
- It is available in denominations of Rs.1,000, Rs.5,000, Rs.10,000, and Rs.50,000.
- Minimum deposit towards KVP is Rs.1,000. There is no limit on the deposit.
- An adult can purchase the certificate for himself or herself or on behalf of a minor.
- Nomination facility is also available.
- KVP can be purchased from any departmental Post office.
- Transfer of certificate is also possible from one individual to other as well as from one post office to another.
- Encashment can be done after 2.5 years from the issue date of KVP.
- The minimum lock-in period under this scheme is 2 years and 6 months.
- Maturity period of the scheme is 8 years and 4 months.
Encashment of KVPs can be done at the Post Office where it was issued. It can also be encashed elsewhere, provided the Officer-in-Charge of the bank or Post Office is okay with verification from the bank of issue or Post Office from where it was issued.
Amount paid on premature encashment of KVP:
Premature encashment from KVP is possible in the following cases:
- Death of the holder or in case of joint holders, death of either holder.
- When ordered by the court.
- On forfeiture from a pledge of a Gazetted Government Officer.
On premature encashment of KVP, the amount to be paid depends on the period of holding of the scheme. For example, the table below indicates the amount required to be paid in case of premature encashment of a Rs.1,000 worth certificate from KVP:
|Period of Holding Certificate||Amount to be paid (Inclusive of interest)|
|Less than one year||Rs.1,000 (No interest)|
|Minimum: 2.5 years Maximum: 3 years||Rs.1,201|
|Minimum: 3 years Maximum: 3.5 years||Rs.1,246|
|Minimum: 3.5 years Maximum: 4 years||Rs.1,293|
|Minimum: 4 years Maximum: 4.5 years||Rs.1,341|
|Minimum: 4.5 years Maximum: 5 years||Rs.1,391|
|Minimum: 5 years Maximum: 5.5 years||Rs.1,443|
|Minimum: 5.5 years Maximum: 6 years||Rs.1,497|
|Minimum: 6 years Maximum: 6.5 years||Rs.1,553|
|Minimum: 6.5 years Maximum: 7 years||Rs.1,611|
|Minimum: 7 years Maximum: 7.5 years||Rs.1,671|
|Minimum: 7.5 years Maximum: 8 years||Rs.1,733|
|Minimum: 8 years Maximum: 8.7 years||Rs.1,798|
Redemption of KVP:
You can redeem the instrument from any post office across the country. If it is redeemed from any other post office, other than the one where the instrument was purchased, you are required to show the Identity Slip. Otherwise, it would need verification from the post office where it was purchased.
Interest after maturity:
The maturity period of KVP is 9 years and 2 months. If the subscriber receives the amount on maturity, interest is payable on the due amount. The interest paid is equivalent to the interest paid on savings account.
Tax on Kisan Vikas Patra:
The amount invested in KVP does not offer any tax deductions under Section 80C. Even the interest earned on KVP is exempted from income tax and TDS of 10% is deducted from interest.
Comparing KVP to NSC:
Comparison between KVP and NSC (National Savings Certificate):
- Both are long term investments and interest rates are comparable.
- Interest earned on NSC is subject to tax and so is KVP.
- The investment as well as interest reinvested until maturity can be offset against taxable income earned under Section 80C, which is not there in KVP.
- While there is an option of premature closure in KVP, NSC does not have the facility.
- While KVP is transferable, NSC is not.
Comparing KVP to PPF:
Comparison between KVP and PPF (Public Provident Fund):
- While KVP is like a bond, PPF is not.
- PPF has a maturity period of 15 years and Rs.1.5 lakh can be invested every financial year, either in a lump sum or in instalments.
- Interest earned from PPF is tax exempted and the invested amount can be deducted from taxable income every fiscal year.
- PPF cannot be used to pledge, hence cannot be given as security towards a loan. However, after five years, PPF can be withdrawn as loan as part withdrawals are allowed.
- It is not transferable, while KVP is.
Comparing KVP to FD:
Comparison between KVP and FD (Fixed Deposit):
- Bank FDs can be closed before maturity at any time by paying a small penalty.
- You can take loans against FDs.
- Freedom to choose tenure when it comes to FDs.
- You can choose the interest payment amount as per your wish, be it annually, semi-annually, quarterly, or monthly.
- A deposit of Rs.1.5 lakh can be made and claimed for deduction under Section 80C.
- TDS is applicable on interest earned on FDs.
- PAN and KYC is required for opening a FD.
- Bank deposit receipt is not transferable in FDs.
KVP is a good option for investment for those who carry out transactions through the post office or do not have a bank account at all. Such investors prefer investing in GOI rather than with banks as they feel it is safer. KVP serves as an alternative instrument as money is doubled in a specific time frame as well as is transferable and comes with some liquidity features. KVP also does not require a PAN and can be transferred multiple times.