What is Kisan Vikas Patra?
India Post introduced the Kisan Vikas Patra as a small saving certificate scheme in 1988. Its primary objective is to encourage long-term financial discipline in people. As per the latest update, the tenure for the scheme is now 115 months (9 years and 5 months).
The minimum investment amount is Rs.1,000 and there is no upper limit. And if you invest a lump sum amount today, you can get double the amount at the end of the 115th month. Initially, it was meant for farmers to enable them to save for the long term, hence the name. Now it is available for all.
To prevent the possibility of money laundering, the government in 2014 made PAN card proof compulsory for investments above Rs.50,000. To deposit Rs.10 lakh and above, you must submit income proofs (salary slips, bank statements, ITR documents etc.).
Types of certificates available
A Kisan Vikas Patra certificate can be of the following types:
Single Holder Type Certificate: This kind of certificate is issued to an adult for themselves 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 both the holders jointly or to the survivor.
Joint ‘B’ Type Certificate: This type of certificate is issued jointly to two adults, payable to either of the holders or to the survivor.
KVP eligibility
The following are eligible for investing KVP:
The applicant must be an Indian citizen
The applicant must be above 18 years of age
An adult can apply on behalf of a minor or a person of unsound mind
Hindu Undivided Family (HUF) and Non-Resident Indians (NRIs) are not eligible to invest in KVP
Who should invest in the KVP scheme
Any Indian citizen above the age of 18 years can buy a Kisan Vikas Patra from the nearest post office. People from rural India (with no bank account) find this particularly appealing. You can also buy a KVP for a minor or jointly with another adult. Don’t forget to mention the date of birth of the minor and the name of the parent/guardian. A Trust can also buy one, but not an HUF or an NRI.
KVP is a good choice for risk-averse individuals, who have surplus money, which they may not require in the near future. It all depends on your risk profile and goals.
For instance, people seeking tax-saving schemes have better options like Public Provident Fund, National Saving Certificates and tax saving bank FD Schemes. Hence, play to your financial strengths.
Features and Benefits of Kisan Vikas Patra
Guaranteed returns
Regardless of the market fluctuations, you will get the sum guaranteed. As this scheme was originally intended for the farming community, the priority was to encourage them to save for rainy days.
Capital protection
It is a safe mode of investment and not subject to market risks.
Interest
The effective interest rate for Kisan Vikas patra varies depending on the number of years invested in KVP at the time of purchase. The current interest rate is 7.5% p.a. for the Q2 FY 2023-24, i.e. quarter starting from 1 July 2023 to 30 September 2023, compounded yearly.
Maturity
The maturity period for Kisan Vikas Patra is 115 months and you can avail the corpus then. The maturity proceeds of KVP will continue to accrue interest till you withdraw the amount.
Taxation
It doesn’t come under the 80C deductions, and the returns are completely taxable. However, Tax Deducted at Source (TDS) is exempt from withdrawals after the maturity period.
Rules to premature withdrawal
Though the account matures after 115 months, the lock-in period is 30 months (2 years and six months). Encashing the scheme early is not allowed, unless in the account holder’s demise or court order.
Ease & affordability
KVP is available in denominations of Rs.1,000, Rs.5000, Rs.10,000 and also Rs.50,000 for investment. There is no maximum limit. Please note that denominations of Rs.50,000 are available only at the head post office of a city.
Loan against KVP certificate
You can use your KVP certificate as collateral or security to avail secured loans. The interest rate is comparatively lesser for such loans.
Nomination facility
Collect a nomination form from the post office, and fill up the required information of the nominee.
KVP certificate issuance
If payment is done through cash, they issue the KVP Certificate on the spot, and for cheque, demand draft or money order, you will have to wait till the amount is cleared to the post office.
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