Kisan Vikas Patra (KVP) is a deposit scheme by Government of India and available in all the post offices & major banks across country. KVB was launched in 1988 to encourage savings and financial discipline with a focus on farmers and hence the name. It was discontinued briefly since 2011 and relaunched in 2014. In case of KVB, the investor deposits the money and gets back double of the same at the time of maturity. For e.g. if the deposit is made for Rs 5,000 he would get back Rs 10,000 at the time of maturity.
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Sovereign Guaranteed: KVP is part of “Small Savings Scheme” like PPF, SCSS, etc and is guaranteed by Government of India. This means full safety of capital.
Guaranteed returns: The maturity amount and period are fixed. The interest rate is fixed through the entire duration of investment.
Taxation: The interest income is fully taxable and taxed at your marginal income tax rates.
TDS: There is NO TDS (Tax Deducted at Source) for KVP
Tax Benefit: There is NO tax benefit on purchase of KVP
Also Read: Best Tax Saving Investments u/s 80C
Loan against KVP: Banks give loan against KVP certificates. These loans are cheaper than personal loans.
Nomination Facility: You can fill the relevant nomination form and submit it to the relevant post office.
Transfer: KVP can be transferred from one post office to another and also from one person to another.
KVP Certificate Issuance: In case of cash payment the KVP certificates are issued immediately. For Cheque or demand draft the certificates are issued after the clearance.
KVP Identity Slip: along with the KVP certificate a KVP identity slip is also issued to investors. This includes the the KVP serial number, the amount, the maturity date and the amount to be received on the date of maturity.
Interest Rate: Government of India declares the interest rates every quarter. The interest rates for Jan to Mar 2020 is 7.6% compounded annually
Maturity Period: Depending on the interest rate the maturity tenure changes as its dependent on the months it takes to double the money. For Jan to Mar 2020 the maturity tenure is 113 months with interest rate of 7.6%
KVP Premature Withdrawal before Maturity: KVP has lock-in of 30 months from the date of investment which means you cannot withdraw before 30 months (Two and half years). After that premature withdrawal is allowed.
The table below shows the value for Rs 1,000 KVP certificate.
Also Read: PPF – A Must Have Investment
The investment process of KVP is still offline. You need to visit the post office/bank and submit filled Form A.
Also Read: NSC – Tax Benefit, Interest Rates & more
I have listed the pros and cons for KVP below:
KVP – The good thing:
Also Read: Highest Interest Rate on Bank FD – updated every month
KVP – The bad part:
Invest in KVP if you are looking for sovereign guarantee and slightly higher rates than government banks offer. However, do remember that you do not have flexibility selecting your tenure.
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