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.
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.
Similar to National Savings Certificate, even Kisan Vikas Patra has three different types of certificates as such:
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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The minimum investment in case of KVP is INR 1,000 and in multiples of INR 1,000 thereof.
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.
The investment tenure in case of KVP is 118 months that is, 9 years and 8 months.
The rate of return in case of KVP for FY 2017-18 is 7.3% p.a.
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:
Individuals can claim loan facility against KVP certificates.
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.
The eligibility for KVP is as follows.
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 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.
|Investment Amount||INR 25,000|
|Date of Investment||10/04/2018|
|Maturity Amount||INR 50,000|
|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.
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