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 10 years & 4 months (124 months) if you purchase the certificate after 1 April 2020. 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. 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 124 months (10 years & 4 months) if you purchase the certificate between 1 April 2020 and 30 June 2020. 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 124th 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 AADHAAR number as proof of identity of account holder

2. 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 self 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.

3. 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 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.

4. 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 124 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 124 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. 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.

5. 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	1154
3 years but < 3.5 years	1188
3.5 years but < 4 years	1222
4 years but < 4.5 years	1258
4.5 years but < 5 years	1294
5 years but < 5.5 years	1332
5.5 years but < 6 years	1371
6 years but < 6.5 years	1411
6.5 years but < 7 years	1452
7 years but < 7.5 years	1494
7.5 years but < 8 years	1537
8 years but < 8.5 years	1582
8.5 years < 9 years	1628
9 years < 9.5 years	1675
9.5 years < 10 years	1724
10 years but before maturity	1774
On maturity of certificate	2000

6. Historic Interest Rates of KVP

Quarter/Financial Year	2016-2017	2017-2018	2018-2019	2019-2020	2020-2021
April-June	7.8% (will mature in 110 months)	7.6% (will mature in 113 months)	7.3% (will mature in 118 months)	7.7% (will mature in 112 months)	6.9% (will mature in 124 months)
July-September	7.8% (will mature in 110 months)	7.5% (will mature in 115 months)	7.3% (will mature in 118 months)	7.6% (will mature in 113 months)	Yet to announce
October-December	7.7% (will mature in 112 months)	7.5% (will mature in 115 months)	7.7% (will mature in 112 months)	7.6% (will mature in 113 months)	Yet to announce
January-March	7.7% (will mature in 112 months)	7.3% (will mature in 118 months)	7.7% (will mature in 112 months)	7.6% (will mature in 113 months)	Yet to announce

7. Steps to invest in Kisan Vikas Patra and documents required

Investing in Kisan Vikas Patra is simple, as mentioned below. Step 1: Collect the application form, Form A, and fill the form with the necessary information. Step 2: Submit the duly filled form to the post office or bank. Step 3: If the investment in KVP is through an agent, then the agent should fill Form A1. You can download these forms online. Step 4: The Know Your Customer (KYC) process is mandatory and you need to submit the ID and address proof copy (PAN, Aadhaar, Voter’s ID, Driver’s License, or Passport). Step 5: Once the documents are verified, you must make the deposit. The payment can be made by cash, locally executed cheque, pay order, demand draft drawn in the favour of the postmaster. Step 6: You will get a KVP certificate immediately unless you make payment by cheque, pay order, or demand draft. 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.

8. Nomination

Single holders or joint holders of a certificate can make a nomination by filling up the details in Form C at the time of purchase. You can nominate any person so that the nominee will be entitled to the benefits of the certificate in the event of the death of the single holder or both the joint holders. If the nomination is not made at the time of purchase, the single holder, joint holders, or the surviving joint holder can make a nomination at any time after the purchase of the certificate but before the maturity by submitting the duly filled Form C. Submit it to the postmaster or bank officer where the certificate is registered. However, no nomination can be made if the certificate is applied for and held by or on behalf of a minor. If a nomination is made in this case by the holder or holders of the certificate will be cancelled or altered using Form D. When you have more than one certificates registered on different dates, you have to make separate applications for the nomination, cancellation of the nomination, or variation of the nomination. Such an application will be effective from the date of its registration and will be noted on the certificate. Nominations made for the first time is free-of-cost. Subsequent nominations or cancellation will be charged at Rs.20 per application.

9. Frequently Asked Questions (FAQs)

Q. Can I get my KVP transferred from post office to bank? A. Yes, your certificate can be transferred from post office/bank to any other post office/bank by submitting an application via Form B either at your post office or bank. The application must be signed by the holder or holders, except for Joint ‘A’ type certificates where one of the joint account holders can sign the application if the other is dead. Q. Can I transfer a KVP certificate to another person? A. A certificate can be transferred from one person to another with the consent of an officer of the post office or bank in the following cases:

• From a deceased person to his/her heir.
• From the holder to the court of law or to any person as specified by the court of law.
• From a single holder to the names of joint holders where the transferee is one.
• From joint holders to one of the joint holders.
• From single/joint holders to another person.

Further, an authorised postmaster or bank officer will give consent to the transfer only if the following conditions are satisfied:

• If the transferee is eligible to purchase the certificate as per the rules.
• If the transfer is made after the completion of at least a year from the date of certificate purchase or if the transfer is made before the completion of one year, the transfer must fall under one of the following categories:
  • Transfer made to a close relative out of natural love and affection. Here, close relative means husband, wife, lineal ascendent or descendent, brother, or sister.
  • Transfer to the heir or nominee of the deceased holder.
  • Transfer from the holder to the court of law or to any person as specified by the court of law.
  • Transfer in accordance with pledging the certificate at RBI, cooperative society or a scheduled bank.
  • Transfer in the survivor’s name in the event of the death of one of the joint holders.

No transfer is possible with respect to a certificate held by or on behalf of a minor until the minor is alive. Q. Is the old certificate valid even after transferring it to another person? A. No, upon successful transfer, a new certificate will be made available with the same issue date as the original certificate but in the name of the transferee.