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Fincash » Post Office Saving Schemes » KVP or Kisan Vikas Patra

KVP or Kisan Vikas Patra: A Detailed Overview

Updated on July 11, 2019 , 477 views

Kisan Vikas Patra or KVP is one of the small savings instruments promoted by Government of India. Though this scheme was launched in the year 1988 it was discontinued in 2011. However, it was re-introduced in the year 2014. The objective of this scheme is to promote small-scale savings for long-term tenure. The objective of Kisan Vikas Patra is to double the investment during the investment tenure. Being a Government-backed scheme, the risk-appetite of KVP is low. Moreover, it is classified as an instrument bearing fixed duration. In addition, any amount invested in KVP does not attract tax deductions under Sec. 80c of Income Tax Act, 1961. So, let us understand the concept of Kisan Vikas Patra or KVP, benefits of KVP, eligibility and how to purchase KVP, and other parameters.

About Kisan Vikas Patra (KVP)

KVP or Kisan Vikas Patra was launched in the year 1988. Since inception, this savings instrument has gained a lot of popularity among individuals. However, the Government of India decided to discontinue the scheme in 2011. This decision was taken based on the recommendations of a committee set up by the government which suggested KVP can be used for money laundering purposes. However, the government revoked its order and reintroduced KVP in 2014 as it witnessed a fall in domestic savings. The interest rate prevalent on KVP for FY 2017-18 is 7.3% p.a. It is suitable for individuals who are looking for a fixed income and have a low-risk appetite.

Earlier, only post offices in India were allowed to issued KVP. However, now the government has even allowed certain designated public sector banks to trade in Kisan Vikas Patra or KVP. KVPs are issued in denominations of INR 1,000, INR 5,000, INR 10,000, and INR 50,000. The aim of KVP is to double your investment money over the investment tenure of 100 months, that is, 8 years and 4 months’ time. The KVP has a lock-in period of two and half years. Post the tenure, individuals can redeem their money from KVP along with accumulated interest till the investment is held.

Kisan Vikas Patra Scheme: Types of Certificates

Similar to National Savings Certificate, even Kisan Vikas Patra has three different types of certificates as such:

  • Single Holder Type Certificate: In this certificate, the payment is made to the holder. Here, the certificate is issued on their own or on behalf of the minor.
  • Joint Holder Type A Certificate: In this type, The certificate is issued to both the KVP holders jointly and is payable to both the owners or to the survivor.
  • Joint Holder Type B Certificate: In case of Joint Holder Type B Certificate, the certificate is issued to both the holders, however; in case of payment it can be done to any of the holder or the survivor.

Kisan Vikas Patra or KVP Interest Rate 2018

The government of India determines the interest rates for KVP certificate periodically. The prevailing interest rate for FY 2017-18 on KVP scheme is 7.3% p.a. which is applicable for compounding. Individuals purchasing KVP certificates at this interest rates will earn the same interest rates throughout their investment tenure. Even if there is a change in the interest rates, it will not affect the investments.

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Kisan Vikas Patra Scheme- Investment Details

Minimum Investment

The minimum investment in case of KVP is INR 1,000 and in multiples of INR 1,000 thereof.

Maximum Investment

There is no capping on the maximum investment in KVP. Individuals need can invest as per their requirements. However, in case of investment above INR 50,000 individuals need to furnish a copy of PAN Card while for investment above INR 10 Lakhs, they need to furnish documents stating the source of funds.

Investment Tenure/Maturity Period

The investment tenure in case of KVP is 118 months that is, 9 years and 8 months.

Rate of Return

The rate of return in case of KVP for FY 2017-18 is 7.3% p.a.

Premature Withdrawal:

Premature withdrawal is available in case of KVP. Individuals can redeem their investment after 2 Years and 6 months. Also, in other cases, where KVP can be withdrawn is:

  • In case of death of the holder either in single or joint
  • In case of an order by Court of law
  • On forfeiture by a pledge

Loan Facility

Individuals can claim loan facility against KVP certificates.

Tax Benefits

Individuals cannot claim any tax benefits against money invested in KVP. In addition, the interest generated on their KVP is also liable for the tax.

KVP- Eligibility & Procedure

The eligibility for KVP is as follows.

  • The applicant must be an adult and a resident of India
  • The applicant for KVP either in his name or on behalf of any minor investor
  • Trusts are also eligible to purchase KVP.
  • Hindu Undivided Family (HUF) and Non-Resident Indians (NRIs) are not eligible to purchase KVP.

KVPs can be transferred from one person to another multiple time. Individuals can also transfer their post office and even the nomination. For purchasing KVP, individuals first need to visit the post office or designated banks through which they wish to invest in KVP. Then individuals need to fill in the KVP form. Along with the form, individuals need to submit documents related to identity proof and address proof such as a copy of passport, or voter identity card. If an individual wishes to invest more than INR 50,000 in KVP for a particular year then; they need to submit a copy of Permanent Account Number (PAN) card. In addition, if the investment is more than INR 10,00,000, then they need to furnish documents showing the source of funds.

KVP Calculator

KVP calculator is a tool that helps individuals to understand how much will their KVP investment over the investment tenure. The input data that is required to be entered in the KVP calculator is the beginning investment date and the investment amount. The output data that you get is the maturity amount, maturity date, and total interest amount. The KVP calculator is explained with the help of an illustration.

Illustration

Parameters Details
Investment Amount INR 25,000
Date of Investment 10/04/2018
Maturity Amount INR 50,000
Maturity Date 10/06/2027
Total Interest Amount INR 25,000

Thus, if you are a risk-averse individual and seeking to earn income over a long-term tenure then choose to invest in Kisan Vikas Patra or KVP.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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