Kisan Vikas Patra – Eligibility, Features, Interest Rates & Returns

Kisan Vikas Patra is a certificate scheme from the Indian post office. It doubles a one-time investment in a period of approximately 9 years & 10 months (118 months). For instance, a Kisan Vikas Patra for Rs. 5000 will get you a corpus of Rs. 10,000 postmaturity. In this article, we will explore the features and potential of this scheme.  

1. 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 2014 amendment of the scheme, the tenure for the scheme is now 118 months (9 years & 10 months). The minimum investment is Rs. 1000 and there is no upper limit. And if you invest a lumpsum today, you can get double the amount at the end of the 118th month. Initially, it was meant for farmers to enable them to save for long-term, and hence the name. Now it is available for all. To prevent the possibilities of money laundering, the 2014 government made PAN Card proof compulsory for investments above Rs. 50,000. To deposit Rs. 10 lakhs and above, you must submit income proofs (salary slips, bank statement, ITR document etc.). It is a low-risk savings platform, where you can safely park your money for a certain period. Further, it is also mandatory to submit AADHAR number as proof of identity of account holder

2. Who should invest in the KVP scheme

Any Indian citizen above age 18 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 one 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. If you are open for some level of risk exposure, you have the Equity Linked Savings Scheme (ELSS). Hence, play to your financial strengths.

3. Features & 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. You will receive the investment and gains when the tenure ends.

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 7.7% for the quarter 1 October 2018 to 31 December 2018 prior to which the rate was 7.3%, compounded yearly. By compounding the interest, you will receive more returns on your deposit.

Tenure

The maturity period for Kisan Vikas Patra is 118 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

You can withdraw the amount after 118 months. But the lock-in period is 30 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. 100, Rs. 500, Rs. 1000, 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. If you are nominating a minor, mention the date of birth.

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.

KVP Identity Slip

This includes the Kisan Vikas Patra Certificate, the KVP serial number,  the amount, the maturity date and the amount to be received on the date of maturity.

4. How KVP accrues interest & double the money – an example

KVP is a low-risk scheme. Below table shows the returns over the period for an investment of Rs 1000.

Time	Amount Repaid (Rs)
2 .5 years but <3 years	1201
3 years but <3.5 years	1246
3 .5 years but <4 years	1293
4 years but <4.5 years	1341
4 .5 years but <5 years	1391
5 years but <5.5 years	1443
5.5 years but <6 years	1497
6 years but <6.5 years	1553
6.5 years but <7 years	1611
7 years but <7.5 years	1671
7.5 years but <8 years	1733
8 years but before the maturity	1798
9 years & 10 months ( 100% Return = 118 Months Investment)	2000

5. How to invest in  Kisan Vikas Patra & the documents required

Investing in Kisan Vikas Patra is simple, as mentioned below.  Collect the application form (Form-A) and submit it duly filled to the PO. If the investment in KVP is through an agent, then the agent should fill Form-A1. You can download these forms online. The Know Your Customer (KYC) process is mandatory and you need to submit the ID proof copy (PAN, Aadhaar, Voter’s ID, Driving License or Passport). Once they verify the documents and receive the deposit, you will get a KVP certificate. Keep this safe as you will need to submit this at the time of maturity. You can also request them to send you the certificate by email.  In short, if Kisan Vikas Patra seems like a worthwhile investment that matches your financial goals, invest immediately. It is easy enough to open and manage. All you need to do is have the amount ready and pay one visit to the nearest post office.   In short, if Kisan Vikas Patra seems like a worthwhile investment that matches your financial goals, invest immediately. It is easy enough to open and manage. All you need to do is have the amount ready and pay one visit to the nearest post office.