The Government of India first introduced the Kisan Vikas Patra saving scheme in 1988. It was found that the original scheme could be misused for money laundering. So they then re-introduced it in 2014 with some changes. In this article, the different features as well as benefits of this scheme are discussed.
Who can buy a Kisan Vikas Patra certificate?
The following people are eligible to buy/invest in a Kisan Vikas Patra (KVP) certificate:
- An adult Indian resident (NRIs and HUFs are not eligible).
- An adult on behalf of a minor.
- Two adults jointly.
Kisan Vikas Patra Interest Rate
- The current rate of interest for the Kisan Vikas Patra scheme is 7.5%.
- The government revises the interest rate periodically.
Kisan Vikas Patra Maturity Period
The amount invested in Kisan Vikas Patra matures in 115 months.
Is premature withdrawal allowed?
- Yes. Premature encashment of KVP certificates is allowed after two and a half years from the date of issue.
- There is no penalty on premature withdrawal.
How to buy a KVP certificate?
- You can buy KVP certificates from any Post Office. (As of now you cannot buy them online.)
- They are available in denominations of Rs.1000, Rs.5000, Rs.10,000, and Rs.50,000.
- You can make the payment via cash, cheque, DD, or pay order.
- You can submit the form in person, or via an agent.
Minimum Investment – Rs.1000
Maximum Investment – No maximum limit.
Is nomination facility available?
Yes, it is available.
Is transfer facility available?
- Yes. You can transfer KVP certificates from one person to another. However, you must complete the formalities and get approval from the post office.
- You can also transfer them from one post office to another.
What are the benefits of Kisan Vikas Patra?
KVP offers the following benefits to investors:
- The minimum investment limit is Rs.1000 only. So you can use it for small savings.
- You can choose exactly how much you want to invest.
- There is no maximum limit on investment in KVP.
- The longer maturity period encourages long-term savings.
- A large postal network ensures easy availability of KVP certificates. Hence, people in rural areas can invest in KVP even if there are no banks there. It provides a safe investment option. And thus prevents them from investing in some fraudulent scheme.
- Also, the purchase process is very simple.
- It offers low risk and assured returns. It is a very safe investment.
- You can present KVP certificates as collateral against loans. And you can also use them to obtain a loan from a bank.
- Pre-mature withdrawal facility increases liquidity.
Are there any Kisan Vikas Patra tax benefits?
KVP certificates don’t offer any real tax benefits. This is because of the following reasons:
- Investment made in KVP is not deductible under section 80C.
- Interest earned is taxable. (TDS is not deductible on interest on KVP.)
- There is no tax deduction on the entire amount received at maturity.
Hence, it is more suitable for those who don’t pay taxes at all. Or for those who are in the lower tax bracket.
To read about other savings schemes offered by the Post Office, please click here.