Kisan Vikas Patra (KVP): Things to know before investing

Kisan Vikas Patra (KVP} is one of the nine small savings schemes offered by Government of India. KVPs are available at post office branches in the form of certificates at all post office branches and select banks across the country. In this post, I will discuss all the things that you must know before investing in Kisan Vikas Patra (KVP) scheme.

It is a one-time investment scheme in which the invested money gets doubled during the tenure of investment. For example, a Kisan Vikas Patra certificate of Rs. 1000 will get you a corpus of Rs. 2000 at the time of maturity. Currently, you can purchase KVP certificates from select public banks as well as from post office branches.

Kisan Vikas Patra was introduced in 1988 to encourage long-term financial discipline in people. Initially, KVP was launched to encourage farmers to save for rainy days and hence the name.

Now, KVP certificates are available for all. The scheme became very popular due to its risk-free nature and attractive interest rates. However, it was withdrawn in 2011 and relaunched in 2014 with mandatory KYC norms. Below is all the required information about the new Kisan Vikas Patra.

Features of Kisan Vikas Patra (KVP) Account

1. It is one of the nine small savings schemes offered by Indian Post Office.

2. It is a government-backed instrument. This means complete safety of your investment.

3. The returns are guaranteed and not subject to market risks as the interest rate and period are fixed in KVP.

4. The certificate can be purchased by an adult for himself or on behalf of a minor or by two adults.

5. You can purchase the certificates from the post office branches all over India.

6. KVP is available in the denominations of Rs 1000, Rs 5000, Rs 10,000 and Rs 50,000 for investment.

7. Nomination facility is available under the scheme.

8. If you pay cash for purchasing then the certificates are issued immediately. If you pay through cheque or demand draft then the certificates are issued after the clearance.

9. Once all done, you will get your certificate and a KVP identity slip. This includes the KVP serial number, the amount paid, date of maturity and the maturity amount to be received at the time of maturity.

10. Certificate can be encashed after 2 and 1/2 years (30 months) from the date of issue.

11. You can use your certificate as security to avail loans from banks. The interest rate for such loans is comparatively lesser.

12. KVP certificate can be transferred from one post office to another and from one person to another.

Eligibility for investing in Kisan Vikas Patra (KVP) Account

The following is the eligibility criteria for buying a KVP Certificate:

1. The applicant has to be an Indian citizen with an age of more than 18 years.

2. A parent/guardian can also buy on behalf of a minor.

3. It can also be bought jointly with another adult.

4. HUFs and NRIs cannot invest in Kisan Vikas Patra.

5. Trusts can also buy.

Rate of Interest for Kisan Vikas Patra (KVP) Scheme

From 01.04.2020, the interest rate applicable to KVP is 6.9% compounded annually. You will get more returns on your investment by compounding the interest. The amount invested doubles in 124 months that is in 10 years 4 months.

How to invest in Kisan Vikas Patra (KVP)?

Investing in Kisan Vikas Patra is very simple. However, the process to invest in KVP is still offline. You have to visit a post office or a bank to collect Form A or you can download this form online. 

Submit duly filled Form A to post office or bank for buying a KVP certificate. If you are investing through an agent, then the agent will fill Form A1. 

You need to submit the ID proof copy (PAN, Aadhaar, Voter’s ID, Passport or Driving License) for the KYC process. Once verification is complete and payment is made, you will get your certificate. 

Keep your certificates carefully as you would need them while redeeming on maturity.

Minimum and Maximum Amount for the opening of the account

You can open a Kisan Vikas Patra account against a minimum of Rs. 1000/-. You can choose any amount in multiples of Rs. 1,000. There is no maximum limit on the amount that can be invested.

Tax Benefit under Kisan Vikas Patra (KVP) Account

Investment in KVP doesn’t come under section 80C deductions. The interest income is completely taxable. However, there is no TDS (Tax Deducted at Source) for KVP.

Should you invest in Kisan Vikas Patra (KVP)?

You can invest in Kisan Vikas Patra scheme if you are looking for safe and guaranteed returns. The interest rate applicable on KVP is comparatively higher than banks offer for fixed deposits. Please note that the tenure of KVP is fixed and you cannot select the tenure of your choice.

Also read: Post Office Monthly Income Account

Also read: National Saving Certificate (NSC) | How to buy NSC?

Also read: Public Provident Fund (PPF) - A popular saving scheme

Also read: Post Office Recurring Deposit (RD) Account

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