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Kisan Vikas Patra (KVP) is a small savings scheme offered by India Post. It guarantees returns and doubles your investment in approximately 9.5 years (115 months), making it one of the most popular kisan vikas patra schemes for risk-averse investors.
KVP appeals to those seeking guaranteed returns and a simple investment avenue. It is ideal for long-term goals and offers stability with a fixed interest rate. Many consider Kisan Vikas Patra if they prioritise safety over high returns and tax benefits aren't a major concern.
Kisan Vikas Patra is open to all Indian residents aged 18 and above for long-term savings. It offers guaranteed returns. You can choose from single or joint certificates with fixed interest rates and secure your future.
The interest rate of KVP in 2023 was 7.5% p.a., compounded annually. The KVP postal scheme is attractive as it offers low-risk, easy investment options and benefits like loans and nominations. Let’s get into the details.
What is Kisan Vikas Patra?
Kisan Vikas Patra (KVP) is a certificate scheme launched in 1988 to promote small savings. Despite the name, the Kisan Patra scheme is open to all Indian residents, not just farmers. You can invest a minimum of Rs. 1,000 with no upper limit and get maturity returns that double your investment. Simply put, just imagine a piggy bank that can double your money in a few years. KVP is like that piggy bank for grown-ups. It helps them save without worry for various long-term financial goals.Types of Kisan Vikas Patra (KVP)
There are three types of KVP certificates:
- Single holder: Issued to one adult or a minor.
- Joint A type: Issued to two adults, payable to both or survivor.
- Joint B type: Issued to two adults, payable to either or survivor.
Single holder type
This certificate is issued in the name of one adult or a minor (by a guardian). It's suitable for individual long-term savings goals but might not be ideal if you need access to money sooner.
Joint A type
This certificate is jointly owned by two adults. The maturity amount is payable to both account holders or the surviving account holder if one passes away. It's ideal for joint financial planning or including someone in the investment benefits. However, accessing funds requires consent from both holders.
Joint B type
Similar to Joint A, but the maturity amount can be paid to either the account holder or the survivor. This offers flexibility if one account holder needs funds earlier, but it may leave the other without access to the planned funds.
Eligibility Criteria for the Kisan Vikas Patra Scheme
If you want to invest in KVP, you will need to meet the Kisan Vikas Patra eligibility criteria:
- An Indian citizen above 18 years old
- An Indian citizen who is a minor can be included through a legal guardian
- Hindu Undivided Family (HUF) and Non-Resident Indians (NRIs) are not eligible to invest
Who Should Invest in the Kisan Vikas Patra (KVP) Scheme?
Kisan Vikas Patra (KVP) is suitable for risk-averse investors seeking guaranteed returns. It’s ideal for long-term savings goals like retirement planning or children’s education. However, if tax benefits are a priority, you might want to explore other options like PPF or ELSS.
KVP can also be a good option for young investors to start saving for goals far in the future, such as retirement planning. But it might not be the best choice for short-term or emergency savings. Consider combining Kisan Vikas Patra with other investments to create a balanced portfolio that matches your risk tolerance and financial goals.
Kisan Vikas Patra Online
Although Kisan Vikas Patra online applications aren’t directly available, you can download the application form (Form A) from the India Post website. Submit the completed form along with KYC documents at your nearest post office or authorized bank branch.
Documents Required for Kisan Vikas Patra
To invest in Kisan Vikas Patra, you will need:
- Application form (Form A)
- KYC documents such as valid ID proof (PAN, Aadhaar, etc.) and address proof
Kisan Vikas Patra Interest Rate
The current interest rate of Kisan Vikas Patra (as of April 1, 2023) is 7.5% p.a. compounded annually. This means interest is added to the principal yearly, helping your investment grow faster and double over the maturity period.
Benefits of the Kisan Vikas Patra Scheme
Here’s why the Kisan Vikas Patra scheme can be a good fit if you prioritise safety in your savings:
- Long-Term Savings: With a lock-in period of about 115 months (~9.5 years), KVP encourages disciplined, long-term saving habits, ideal for future financial goals.
- Fixed Rate of Interest: Unlike market-linked investments, KVP offers a fixed interest rate throughout the tenure, providing predictability and security for your money.
- Collateral for Loan: You can use your KVP certificate as collateral to avail loans from banks or financial institutions, providing liquidity in emergencies. However, be cautious as using KVP as collateral may risk losing your certificate if the loan isn’t repaid.
- Non-Transferable: KVP certificates are generally non-transferable, helping prevent impulsive decisions and maintaining your investment plan.
- Physical Certificate: Investments are issued as physical certificates in denominations of Rs. 1,000, Rs. 5,000, Rs. 10,000, and Rs. 50,000, giving you a tangible proof of investment.
Tax Implications on Kisan Vikas Patra
While the invested amount is not tax-deductible under section 80C, the interest earned on KVP is taxable as “income from other sources” every year. The tax you pay depends on your income tax bracket. The tax treatment is straightforward compared to other investments, but it means you’ll pay tax annually on the interest accrued.
Frequently Asked Questions (FAQs)
What is the maturity period of KVP?
The maturity period of Kisan Vikas Patra (KVP) is approximately 115 months, which is about 9 years and 5 months. After this period, your investment doubles.
In how many months will the KVP be doubled?
The investment doubles in approximately 115 months, which means 9 years and 5 months.
Can I transfer a KVP certificate to another person?
In most cases, no. Transfers are only allowed under special circumstances with approval from the post office.
Is Kisan Vikas Patra interest taxable?
Yes, the interest earned on KVP is taxable each year as "income from other sources."
Is KVP better than FD?
KVP offers a fixed interest rate and guaranteed returns similar to a Fixed Deposit (FD). However, KVP has a longer lock-in period of about 9.5 years, whereas FDs offer flexible tenures from a few months to 10 years. KVP can be used as collateral for loans, which may not always be possible with FDs. Depending on your goals and liquidity needs, either can be suitable.
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