(KVP) Kisan Vikas Patra Scheme – Features, Eligibility, Tax Benefits etc

Kisan-Vikas-Patra

India Post apart from its postal communication services has an array of services related to finance which includes saving schemes of the Indian government. One of such saving schemes is Kisan Vikas Patra. It is widely popular amongst the lower income group as it not only gives them a safe investment vehicle but also an instrument that doubles their amount within the tenure. In India, where people do not have a proper idea of saving especially in the lower income group, saving schemes of this nature helps a lot. Especially, this instrument was introduced for the farmers to save for the rainy season and to cope up with a loss in farming. Later, the instrument was made available for all.


What is Kisan Vikas Patra?

Kisan Vikas Patra was introduced in the year 1988 as a small saving scheme by India Post. This was mainly introduced for building the habit of saving in people for long-term.  The scheme has been amended multiple times and as per the latest amendment which has been implemented from 1.1.2019, the tenure of the scheme is 112 months that is 9 years and 4 months and the prevailing interest rate of KVP is 7.7%. One can invest a minimum of Rs. 1000 and there is no maximum limit on the investment. The investment must be in multiples of Rs 1000. Within the 112 months tenure, the amount invested would double itself and one can withdraw the same after the tenure ends.


How to purchase Kisan Vikas Patra?

Kisan Vikas Patra can be bought/purchased from Departmental Post offices. The instrument is available in any of the Departmental PS across the country. This was done mainly to ensure that the scheme reaches the nooks and corner of the country where banks aren’t present and post offices are available and people are aware of the same.


Features of Kisan Vikas Patra

Features of Kisan Vikas Patra

Who can purchase Kisan Vikas Patra Certificate?

Any individual can purchase KVP on his or her name and also for two people jointly. The instrument can also be purchased for a minor child by their parents or guardians.One can also nominate a nominee for his or her KVP account. Also, the certificate issued is fully transferable. One can transfer the certificate to another person. It can also be transferred to another post office from the previous one.


What’s is the lock in period of withdrawing amount invested in Kisan Vikas Patra?

Once the certificate has been issued, one can only encash it after the lock-in period of 2 years and 5 months that is a total of 30 months. Within this period, the amount cannot be withdrawn unless the person who is the holder of the account dies or gets an order from the court.


What is the interest amount earned on KVP?

Interest amount of KVP depends on the tenure of investment. So, if you have invested for a period of say 5 years and within that 5 years the interest rate doesn’t change, then you will receive the interest amount according to one interest rate. But interest rates are subjected to change and thus, if the interest rate changes within the tenure of investment, then the interest amount will be calculated according to that. For example, the interest rate now is 7.7% on KVP but before this amendment, the rate was 7.3%. So, the interest amount was calculated taking into account the 7.3% since the time it was implemented and till the latest amendment. Now the rate is 7.7%, the interest amount is calculated taking into account 7.7%. The cumulative interest of all the years the money is invested is paid along with the capital invested once it matures or the person withdraws the amount. Another factor is the interest is compounding interest, so, the longer the tenure is, the more interest you would get.

KVP ensures guaranteed returns despite market fluctuations. If one invests in this instrument, he or she can be assured of getting the amount doubled by the end of the tenure. Since it is a government scheme, the risk of losing money is not there. It is a pure risk-free financial instrument. In no circumstances, you are going to lose your capital invested in KVP.


When KVP certificate is issued and what is its tenure?

The prevailing tenure of the KVP saving scheme is 112 months. That is once you invest in the instrument, the scheme will mature after 9 years and 4 months.

The KVP certificate will be issued instantly if the payment is made in cash. In another scenario, where the payment is made through Demand Draft or cheque the certificate will be received on clearance of such instrument.

The certificate will include all the details like the amount invested, date of maturity of the instrument, an amount that will be received on maturity, the serial number of the KVP certificate and the holder’s detail.


How much amount can be invested in Kisan Vikas Patra?

The minimum investment amount is Rs 1,000 under the scheme. There Is No restriction on the highest investment that can be made. But, the important thing to be noted here is that, if you are investing an amount of more than Rs. 50000 in Kisan Vikas Patra. Then, it has to be done in the Head post office. Moreover, any amount invested more than Rs. 50000, has to be done by providing PAN card details.


How to invest in KVP?

For investing in KVP scheme you are required to –

  • Visit your nearest Post office and take a Form A which is the application form for the scheme, fill and submit it with necessary details. You can also get the form online which is downloadable. If you are investing via an agent, then the form would be Form-A1.
  • You also need to submit KYC documents like

PAN,

Voter’s ID,

Aadhar card,

Passport, etc.

  • The department will verify the documents and if everything is approved then you will be provided the certificate of KVP.

Who should invest in KVP?

As it has been mentioned above, the scheme was formally introduced for the farmers and later it was made open to all. So, if you are looking for a financial scheme that offers –

  • Risk-free investment
  • Good interest rate
  • Easy to understand scheme
  • Protection of Capital etc

Then you can invest in this scheme and most importantly if you are looking for schemes which do not require you to invest huge amount but you can start with a minimal amount, then this is the right one for you.

But, if you are looking for tax saving options then, there are better instruments available like PPF, NSC, and others.


Summary

Kisan Vikas Patra is a saving scheme for all. It opens investment entry route with a very low amount which starts from Rs. 1000. There is no limit on the maximum investment though. The scheme is a government initiative run by India Post. You can purchase KVP from any post office across the country and the process is quite simple. The prevailing interest rate is 7.7% while the tenure of the instrument is 112 months. It is beneficial for those who are looking for schemes that have no market risk associated with it and provides a good return.


 

FAQ

Where one can encash KVP?

During the time of encashment, the buyer can go and get it done from any nearby post office. Provided, he has the identity slip of the KVP or Kisan Vikas Patra certificate intact. The first preference is always given to the issuer post office i.e. the post office from where you purchased KVP certificate originally.


What is the benefit under section 80C on investing in KVP?

There are no 80C deductions applicable to this saving scheme. The whole amount you get whether the interest or the capital is completely taxable. However, once the scheme reaches its maturity, the withdrawals are exempted from TDS.


Can I get a Duplicate KVP certificate if I lose the original one?

In case of loss, theft, mutilated, destroyed KVP certificate, the account holder can apply for a duplicate certificate. In this scenario as well, the holder has to provide the identity slip which was issued to him or her at the time of certificate issue.


Does an NRI invest in KVP?

As of now, only Indian residents are eligible and allowed to purchase the Kisan Vikas Patra.


Can I get KVP from any nationalized banks?

No, you can only purchase Kisan Vikas Patra from Post offices. For big transactions, you need to visit the Head post offices in your city.


Can HUF purchase Kisan Vikas Patra?

No, only an individual or two individuals jointly can purchase this instrument. It can be also purchased on behalf of a minor child but not on behalf of a HUF.


Is KVP interest earned taxable?

Yes, the returns on KVP certificate are taxable.


Can I buy KVP online?

You can download FormA online. But, even if you download the Form-A online, you will have to go and submit all the documents and form physically (offline) in a post office only for buying KVP.


Is it possible to use KVP certificate as a collateral?

If you want a loan for your personal use, you can use the KVP certificate as collateral. Such loans are offered at the very nominal interest rate and easy to acquire as well. It is because of the risk-free nature of the KVP.


CA Abhishek Soni

By CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.

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