Before investing in any kind of scheme, a person may have some of the following questions in mind: “How do you plan your long-term savings?, Is the scheme worth investing in?, Is the interest good enough?, When can you withdraw money and how much?” The government of India introduced a scheme called, Kisan Vikas Patra, which is an attractive scheme and worth investing too. Let’s discuss about KVP in detail.
Kisan Vikas Patra(KVP) is a long-term investment scheme, which was launched by the Indian Government in 1988. It acts as a saving certificate where the invested amount gets doubled in 118 months i.e. approximately 9 years and 10 months. The lowest limit to invest is Rs. 1000 for the certificate. Due to some findings a committee was called and it was expressed that it was being misused, and hence it was shut down in 2011 despite its success. It was relaunched by the Government in 2014.
It started as a small savings scheme that helped people to do long-term savings with attractive plans. During 2011, in a meeting the government committee suggested that Kisan Vikas Patra could be misused for money laundering etc. In 2014, Kisan Vikas Patra was re-launched by the Indian Government with number of changes to the scheme including mandatory PAN Card proof for investments over Rs. 50,000 and source of income proof for investments exceeding Rs. 10 lakhs. The main advantage of opening a KVP investment is the ease and availability of process. The KVP investment certificates are offered in all the post offices across the country. Any resident of India is eligible to invest in the KVP scheme and can avail certificates either jointly, individually or in the name of a minor. The sum of money invested in KVP will be doubled in 9 years and 10 months or 118 months. Another attractive fact about KVP was its interest rate at 8.7% with a low risk factor and guaranteed returns. Afterwards, the rates were brought down to 7.8% in the 2016 Union Budget which went into effect in F.Y. 2016-2017. Current interest offered on KVP is 7.3% (w.e.f. 1.01.2018).
KVP’s are designed for those who need a low-risk investment scheme with fixed appealing schemes and high interest rates.
The eligibility criteria for Kisan Vikas Patra are as follows:-
Kisan Vikas Patra comes in the following types:
For type A and type B, KVP s released to both the combined owners. In case both holders are adult the amount is due to the heir and owners or to either of the heirs, or it is released to combined owners.
The interest rate for Kisan Vikas Patra depends on the total number of years that the applicant might wish to invest for at the time of purchase. It is important to note that the lock-in period for KVP saving schemes is two years and six months. The principal amount can be withdrawn after this period only.
Let’s take an example to understand the interest rates on investment in KVP. Let’s assume the principal amount deposited is Rs. 1, 000/- so at the end of 8 years and 4 months we will get in return a total sum of Rs. 2, 000/-(as per the new reforms introduced in 2018). So, the interest chart for this is as following:
|Time Period||Amount on Maturity (incl. interest)|
|2.5 years but < 3 years||1165|
|3 years but < 3.5 years||1201|
|3.5 years but < 4 years||1238|
|4 years but < 4.5 years||1277|
|4.5 years but < 5 years||1316|
|5 years but < 5.5 years||1357|
|6 years but < 6.5 years||1443|
|6.5 years but < 7 years||1488|
|7 years but < 7.5 years||1534|
|7.5 years but < 8 years||1581|
|8 years but < 8.5 years||1630|
|8.5 years but < 9 years||1681|
|9 years but < 9.5 years||1733|
|9.5 years but < date of maturity||1787|
Kisan Vikas Patra scheme is a beneficial option if you are looking for risk free investment. The amount invested in gets doubled in 118 months (9 years and 10 months). KVP is easily available at any post office in India. KVP certificates can be bought by an adult for self or on behalf of a minor or also by two adults. KVP has fixed rates, which are significantly high for risk-free investments. Kisan Vikas Patra certificate can be presented as collateral against loans. Investors can use the same to obtain a loan from banks. However, it does not offer any tax benefits to investors and buyers must pay income tax on the returns, as per Income Tax Act regulations.
Individuals will have to follow the KYC norms and submit the following documents:
• Identity Proof (Passport, Pan Card, Driving Licence, Voter ID Card, etc);
• Address Proof (Telephone & Electric Bill, Passport, Voter ID Card, etc);
• Passport Size Photo;
• PAN Card is a must in case of Investment above Rs 50,000/-.
It must be duly signed by the investor. The date, address and signature of witness to nomination will also be specified in the form.
In the identity slip, information like serial number of the KVP certificate, issuing price, date of encashment, postmaster’s signature and remarks like in case of duplicate issue and transfer will be mentioned. This identity slip is necessary to produce at the times of encashment and hence be careful while filling details.
KVP can be encashed easily in the post office where it was issued. In case, you need to encash it from some other post office you can do that by fulfilling some formalities first. You have to submit the identity slip that you are offered at the time of issuing the certificate.
So, to encash the KVP you have to provide a letter in writing to the respective postmaster and present your identity slip.
[ Read: Post Office Saving Schemes ]
If you want to withdraw your principal earlier i.e. before the maturity period, you can only do that after the lock-in period of 2 years and 6 months. In certain conditions you can encash KVP prematurely:
To choose the best investment schemes for tax savings and tax planning, enlist the aid of the experts at H&R Block India.