1. Kisan Vikas PatraIndia 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 schemeAny 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 returnsRegardless 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 protectionIt is a safe mode of investment and not subject to market risks. You will receive the investment and gains when the tenure ends.
InterestThe 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.
TenureThe 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.
TaxationIt 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 withdrawalYou 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 & affordabilityKVP 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 certificateYou can use your KVP certificate as collateral or security to avail secured loans. The interest rate is comparatively lesser for such loans.
Nomination facilityCollect 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 issuanceIf 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 SlipThis 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 exampleKVP is a low-risk scheme. Below table shows the returns over the period for an investment of Rs 1000.
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|