Kisan Vikas Patra (KVP)
First launched in 1988, the Kisan Vikas Patra (KVP) is one of the premier and popular saving scheme offering from the Indian Postal Department. This product has had a very chequered history- initially successful, deemed a product that could be misused and thus terminated in 2011, followed by a triumphant return to prominence and popular consumption in 2014.
Kisan Vikas Patra Scheme
- Kisan vikas patra is a saving scheme doubles the amount deposited within the time period of 118 months (9 years 10 months).
- The minimum amount to deposit is Rs.1000 and is available in the denominations of Rs 1000, Rs 5000, Rs 10,000 and Rs 50,000 without an upper-limit on the investment.
- The interest rate in the scheme is compounded annually and is 7.3% p.a. (effective from Jan, 2018).
- KVP is issued in the post offices or authorized banks and can be purchased by :
- An adult in his own name, or on behalf of a minor through an adult guardian
- Two adults jointly
- A Trust
- The lock-up period for the amount invested is 2 ½ years (30 months).
Features and Benefits of Kisan Vikas Patra
There are numerous kisan vikas patra benefits that one can receive by investing in this scheme; some of which are:
- Long term Savings – With the Kisan Vikas Patra, you can start saving early with an amount as low as Rs. 1000. The Kisan Vikas Patra certificates can be bought for amounts as low as Rs. 1000 and going up to as much as you want. There is no upper limit on the amount that you wish to invest. The value is said to be doubled in 100 months i.e. 8 years and 4 months. The value that the holder will receive on the completion of the term is declared on the Kisan Vikas Patra certificate itself.
- 100% Security –We all want security on the investments that we make. The Kisan Vikas Patra scheme gives us just that. Since it is a Government owned scheme, the returns are fixed and secure. Since the amount that you will receive is declared on the certificate, you will have security on the investment that you have made and the amount that you will receive at the end of the term.
- Fixed Rate of Interest –Kisan vikas patra interest rate fixed on the amount that you are investing. This rate of interest ensures doubling of the principal amount in 100 months and is secured since it is a Government bond.
- Collateral for Loan –The Kisan Vikas Patra certificate can be used as a collateral while applying for a loan. Most banks and financial institutions accept this certificate as collateral before issuing you any loan.
- Non-Transferable – The benefits of kisan vikas patra is availed only by the holder of the Kisan Vikas Patra certificate. To have this transferred to another name, the permission of the Postmaster is required along with certain other formalities.
- Tax – Benefits –At the time of encashment or disbursal of the Kisan Vikas Patra scheme, tax is not deducted at source; it is TDS exempted and paid in full to the holder. However, it is the responsibility of the certificate holder to pay the taxes on the interest accrued over the term of the scheme. This scheme is completely exempted from Wealth Tax.
- Physical Instruments of Investment –The Kisan Vikas Patra saving scheme comes as a simple printed certificate that can be saved in a physical form. There is no demat form for this certificate and cannot be traded for in the secondary market.
- Fixed Lock-in Period –The fixed lock in period on this scheme is two and half years. If you have an emergency financial requirement, you can encash this money prematurely after two and half years from the date of issuance with some amount of interest on the same.
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.
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.
Pre-mature Withdrawal of Kisan Vikas Patra
Kisan Vikas Patra scheme allows an investor to withdraw from the scheme before the maturity date. The lock-in period for pre-mature withdrawal is 2 years and 6 months. The investor can appeal the post office or the bank branch and submit the application for pre-mature withdrawal. However, the amount will also be paid prior to the lock-in period in the following cases-
- Death of certificate holder or any of the holders where in the legal heir or the nominee will be paid.
- On order by court of law.
Maturity
The maturity proceeds will be credited to the savings bank account. The interest accrued on the amount is taxable.
Click here to calculate income tax payable.
The following documents must be submitted by the applicant at the time of maturity of certificate.
- Original KVP certificate
- Identity proof of the holder.
- The investor/nominee must sign behind the KVP on the receipt of encashed amount. In the case of a minor KVP Certificate holder attaining majority, the KVP Certificate shall be signed by such a person himself or herself on attestation by a known person to the Post Master.
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