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Kisan Vikas Paatra Savings Scheme

Kisan Vikas Patra – Long Term Investment with Low Risk

Last Update Date : October 04, 2018

Kisan Vikas Paatra Savings Scheme

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.

What is Kisan Vikas Patra?

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.

Kisan Vikas Patra: Overview

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).

Who Should Invest in Kisan Vikas Patra?

KVP’s are designed for those who need a low-risk investment scheme with fixed appealing schemes and high interest rates.

Eligibility for KVP

The eligibility criteria for Kisan Vikas Patra are as follows:-

  • The applicant must be an adult and a resident Indian.
  • The applicant can apply on his own name or on behalf of a minor.
  • Trusts are eligible to invest in the scheme.
  • HUFs (Hindu Undivided Family) and NRIs are not eligible to invest in KVP.

Kisan Vikas Patra Types

Kisan Vikas Patra comes in the following types:

  • Single Holder Type Certificate
    This type of certificate is issued to an adult for himself or to a minor or on behalf of a minor.
  • Joint A Type Certificate
    This is issued to two adults jointly and is payable to both the owners or to the survivor.
  • Joint B Type Certificate
    This Type B Kisan Vikas Patra is issued jointly to two adults and is payable to either of the KVP holders jointly or to the survivor.

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.

Kisan Vikas Patra Interest Rate

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
Maturity Amount 2000

Kisan Vikas Patra Benefits

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.

Kisan Vikas Patra Features

  • A KVP certificate is presented in multiple denominations that gives flexibility to the customers.
  • It is a scheme offered by the Government of India and hence the investor can be sure of returns on invested amount, in a short period of eight years and four months.
  • Minimum contribution to Kisan Vikas Patra is Rs. 1000 with no maximum contribution limit.
  • Applicants also have the option to withdraw the amount before maturity. The lock in period provided is two years and six months.
  • It can be transferred from one person to the other. To pass on the benefits to the new holder, the owner must fulfil all required formalities. Before transferring it to a new holder, it is important to receive an approval at the post office.
  • The income from KVP is taxable but there is no tax deduction (TDS)on entire money received at maturity.
  • But to prevent money laundering, during every transfer, both certificate-giver and taker, will have to sign the form in the post office along with photocopies of the following, under KYC norms (Know your customer)
    1. ID proof
    2. Resident proof
    3. PAN card (if more than Rs. 50,000 invested) as per KYC norms.
  • If certificate gets destroyed or lost, then client can apply for a duplicate certificate by submitting his identity proofs.

Documents Required for Opening KVP

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/-.

Kisan Vikas Patra Form

KVP FormTo purchase a Kisan Vikas Patra certificate, one must file and furnish an application form with the required information. Following are the details you will be required to fill in the application:

  1. The amount for which you need KVP certificates are to be purchased.
  2. The mode of payment i.e. cash or cheque.
  3. Specifying the type of KVP certificate you are issuing whether ‘A’ or joint ’B’.
  4. If it is purchased by combined owners then the name of both the owners is also mandatory to mention.
  5. In case of minor, his date of birth and name of the Guardian who can encash KVP amount must be specified.
  6. Name of all nominee with full address and date of birth.

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 Rules and Guidelines

  • Title and commencement – All rules regarding KVP scheme will be called the “Kisan Vikas Patra Rules, 2014” and will be effective the day they are published in the Official Gazette.
  • The definition of certain words in the rules, unless the context otherwise requires, will mean the following:
    1. Act – Government Savings Certificate Act, 1959
    2. Cash – Indian Cash currency
    3. Certificate – Kisan Vikas Patra
    4. Post Office – Any departmental post office in any part of India doing Savings bank work.
    5. Identity Slip – an identity slip issued to the holder of certificate containing unique details of the holder.
    6. Bank – Any branch of the State Bank of India, all its associate banks and designated branches of commercial and nationalized banks that are authorised for the Public Provident Fund Scheme.
  • Denomination of Certificates – Kisan Vikas Patra scheme certificates can be issued/purchased in denominations of Rs. 1,000, Rs. 5,000, Rs. 10,000 and Rs. 50,000 only.
  • Application of Post Office Savings Certificate Rules, 1960 – The process of application for the Kisan Vikas Patra remains unchanged and is same application process as that of the Post Office Savings Certificate Rules, 1960.
  • Issue of Certificate – The KVP certificate is issued as soon as the payment is made. If for any reason, the Kisan Vikas Patra Certificate cannot be issued immediately, a provisional receipt is issued which can be later exchanged for a certificate.
  • Procedure of Purchase of Certificate – The applicant should himself submit the application form, to purchase the KVP certificate.
  • Payment can be done by cash, demand drafts in the name of postmaster, signed withdrawal form or cheques etc.
  • Conditions for transfer of Kisan Vikas Patra Certificate from one person to another person – Following are the situations when the KVP certificates can be transferred:
    1. From the name of deceased holder to its legal heir;
    2. From single holder to joint holder;
    3. From the holder to the court of Law or another person under the orders of a court of Law.
    4. Transfer in accordance with rule 11;
  • Pledging of Kisan Vikas Patra Certificate – The postmaster may allow the transfer any time to the transferor but according to the rules, they can only pledge to the following mentioned entities:
    1. the President of India or Governor of State
    2. The RBI or a Scheduled Bank or a Cooperative Society including a Cooperative Bank
    3. a Government agency or a Corporation
    4. a Housing Finance Companies approved by the National Housing Bank and notified by the Central Government of India.
    5. a local authority; provided that the transfer of the certificate on behalf of a minor shall not be permitted under this rule.
  • Rectification of mistakes – Postmaster General is responsible for rectifying the clerical and arithmetical mistakes provided it does not cause any financial loss to the Government.
  • Power to relax – If a holder is facing an unjustified hardship, the rules can be made flexible for them on humanitarian grounds, that is not inconsistent with the Act, if recorded in writing and approved by the Central Government.

Encashment

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 ]

Premature Encashment

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:

  1. If ordered by Court of Law;
  2. On forfeiture by a pledge or by a Gazetted Officer;
  3. In case of joint holders, on death of the holder or any of the holders.

Frequently Asked Questions

  1. How to transfer Kisan Vikas Patra Account?
    A KVP certificate can be transferred:

    • Transfer from one post office to another
      You can transfer your KVP certificates from one post office to another by submitting permission from the officer at respective post office. The transferee must be a resident of India and should be eligible to buy KVP certificates.
    • Transfer from one person to another
      A KVP certificate can be transferred from holder to another person by submitting a written letter to the post office for the same.
      Also, you can transfer KVP certificate:

      1. From name of deceased to his legal heir;
      2. From company to the employee on behalf of it was bought;
      3. From single to joint users;
      4. From joint to single user;
      5. From an individual to a Judge of Law or ordered by the court of Law.
  2. Can KVP be withdrawn before maturity?
    Yes, after a lock-in period of 2 years and 6 months it is possible to withdraw principal along with interest of KVP and close it. To avail the premature encashment, he/she must submit in writing to the Post Office, after which the amount will be released.
  3. How to avail loan against KVP?
    Following are the conditions in which you can avail loan against KVP:

    • The applicant applying for the loan should have KVP under his name.
    • The loans against KVP can be taken for business or personal use only.
    • Every bank can have their own bank charges and interest for loans against KVP. The charges may vary time to time and selected banks can charge processing fee for granting the loan.
    • The loan should be repaid within the tenure of KVP i.e. 9 years and 10 months.
    • The margin and loan amount is decided by banks according to investment and maturity of KVP.
  4. Are Co-operative Societies and Co-operative Banks allowed to invest in Kisan Vikas Patra (KVP)?
    No, they are not allowed to invest in Kisan Vikas Patra (KVP).
  5. Can a NRI invest in KVP scheme?
    No, to invest in KVP scheme it is a must that you must be a resident of India.

How Can H&R Block Help You?

To choose the best investment schemes for tax savings and tax planning, enlist the aid of the experts at H&R Block India.

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