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 post maturity.
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.
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 7.8%, 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 on 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.
