Kisan Vikas Patra (KVP): Eligibility, Features, Interest Rates & Returns

Kisan Vikas Patra (KVP) is a certificate scheme from the Indian post office. It doubles a one-time investment in a period of approximately 9.5 years (115 months). For instance, a Kisan Vikas Patra for Rs.5,000 will get you a corpus of Rs.10,000 post-maturity. In this article, we will explore the features and potential of this scheme.

What is Kisan Vikas Patra?

India Post introduced the Kisan Vikas Patra (KVP) 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.).  

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 the Aadhaar number as proof of identity of the account holder.

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 in 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 a 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 to some level of risk exposure, you have the Equity Linked Savings Scheme (ELSS). 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. 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 of Kisan Vikas Patra (KVP) is 7.5% p.a. for the Q2 FY 2024-25, i.e. quarter starting from 1 July 2024 to 31 September 2024, compounded yearly. By compounding the interest, you will receive more returns on your deposit.

Maturity

The maturity period for Kisan Vikas Patra is 115 months, and you can avail of the corpus then. The maturity proceeds of KVP will continue to accrue interest till you withdraw the amount.

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 lower for such loans.

Nomination facility

Collect a nomination form from the post office, and fill up the required information about 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.

Taxation on KVP 

Investment in KVP is not eligible for deduction under the 80C, and the interest income is completely taxable. TDS @ 10% is deducted every year on the Interest credited. Maturity proceeds are also not taxable since it is essential repayment of the principal and Interest ( which is already taxed at the time of accrual every year) 

Documents Required to Apply KVP

When you are filling up application for Kisan Vikas Patra (KVP), you have to keep these documents in hand. Listed below are those

1. Address proof 
2. Birth Certificate 
3. Identity proof, such as Aadhaar Card, Voter ID, PAN, drivers license, passport.
4. And duly filled application form for KVP

Steps to Invest in Kisan Vikas Patra 

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 out Form A1. You can also 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, or 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. The facility to invest in KVP using Department Of Post(DOP) internet banking has also been enabled.

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 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 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 canceled or altered using Form D.

When you have more than one certificate 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 are free of cost. Subsequent nominations or cancellations will be charged Rs.20 per application.

How to Transfer KVP from One Person to Another ?

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 authorized 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.

How KVP Accrues Interest & Doubles the Money – An Example

KVP is a low-risk scheme. The table below shows the returns over the period for an investment of Rs 1,000.

Historic Interest Rates of KVP

KVP Helpline Number

KVP customer care number – 1800 266 6868. 

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Senior Citizen Savings Scheme (SCSS)

Public Provident Fund (PPF) Account

Post Office Saving Scheme