Kisan Vikas Patra

Kisan Vikas Patra

What is a Kisan Vikas Patra?

Kisan Vikas Patra is a Savings Scheme available to individuals which acts as a good investment for a predetermined period.

It is available in the Post Offices in the form of certificates for the individuals to help their income to get invested with the idea of getting possible returns.

It is a savings certificate scheme that was originally launched in the year 1988 by the India Post.  It is a one-time investment scheme of the Government of India.

It is the instrument on which a fixed rate of interest is paid by the Government which is sold by the Government itself and can be purchased by individuals through any Post Office.

Who is eligible under the Kisan Vikas Patra scheme?

Any Indian citizen who has attained the age of above 18 years can take up a Kisan Vikas Patra scheme from the nearest post office.

It is originally designed for use of the farmers but is now available to all.

The KVP certificate can be bought by an Indian citizen for himself, on behalf of a minor or even by two adults.

Non-Resident Individuals and Hindu Undivided Families are not deemed eligible to invest in the KVP scheme.  Even companies cannot avail this scheme.

Documents required under Kisan Vikas Patra

The list of the documents that are required to avail of the KVP scheme are:

  • Submission of Form A is to be made to an Indian Post Office branch or any other specific bank.
  • A form A1 is needed if the application is extended through an agent.
  • The documents required for KYC like the Aadhar Card, PAN Card, Passport, Voter ID, Driving License, or any other document that serves as Identity proof.

What are the features of Kisan Vikas Patra?

  • Assured returns

The returns from this investment do not depend on the market fluctuations.  So, the individuals who have invested money into this scheme will get out an assured amount of returns.

  • Interest is compounded

The interest rate for the KVP scheme varies annually.  These variations depend on the year in which an individual had invested in it.

The interest accrued under this scheme on the invested sum is compounded annually, which ensures more returns to the individuals.

  • Time Horizon

The time horizon under the KVP scheme is 113 months.  After the said period is complete, the scheme automatically matures and extends a corpus to a KVP scheme holder.

If the individuals wish to withdraw the proceeds generated than the maturity period, the amount would accrue interest till the matured amount is withdrawn.

  • Cost of Investment

Individuals can choose to invest in a deposit into this scheme with a little amount as Rs. 1,000 and can invest as much as they choose to.

The sum to be invested has to be a multiple of Rs. 1,000 and to invest an amount greater than Rs. 50,000 needs PAN card details.

  • Taxation Method

An amount that is to be withdrawn after the period of maturity is exempted from the Tax Deducted at Source.

But, this investment made is not entitled to any deductions under the Income Tax Act.

  • Nomination

Individuals can choose to have a nominee in this KVP scheme.  It just requires a nomination form to be filled up.

Individuals can choose to have a minor as their nominee.

Types of Kisan Vikas Patra

Generally, a KVP scheme account may be any one of the following three types:

  1. Single holder type – In this type of scheme, a KVP certification is given to an adult at an age of 18 years or above. They can also choose to avail a certification on behalf of the minor, in case of which the certification will be issued in their name.
  2. Joint A Type – In this type of account, a KVP certification is issued for the name of two individuals, both of them being adults. When the scheme matures, both the account holders receive the pay-out.
  3. Joint B Type – In such a case of account, a KVP certification is issued in the name of two adults. But, unlike the Joint A Type scheme, only one of the account holders or only the survivor will be receiving the pay-out.

What are the benefits of Kisan Vikas Patra?

  • Loan facility can be availed against the KVP certificate

If you have the KVP certificate, you can choose to use it as collateral to get a loan facility from a financial institution.

This gives you the advantage to build a credit facility.

  • Income is assured at the time of maturity

You will have guaranteed returns at the time of maturity.  There will not be any default in the payments made to you by the post office.

The government will pay you the assured amount for an investment you make.

  • Acts as a contingency to the nominee

A KVP scheme acts as a contingency to the nominee in case there is any disturbance.  The nominee will be getting the number of returns assured by the post office.

Are there any disadvantages of Kisan Vikas Patra?

  • Does not provide any deductions under Income Tax

KVP scheme does not provide for any sort of deductions under the Income Tax.  This is not so beneficial as there are other sorts of investments that provide better deductions under the Income Tax.

  • The interest rate is comparatively low

The interest rate under this scheme is very low as compared to other investments like the Public Provident Fund and the National Savings Certificate.

  • No additional benefits are provided

There are no additional benefits over the other savings scheme like PPF and NSC which proves to be a disadvantage.

  • Long Maturity Period

The maturity period is very long as compared to the National Savings Certificate.

Are Kisan Vikas Patra tax free?

There is no deduction available to individuals regarding the investment made.  However, the withdrawal from this scheme is exempted from Tax Deducted at Source (TDS).