Kisan Vikas Patra (KVP) scheme was re-launched by the Government very recently (2014). The scheme is mainly targeted at the group who does not have means or access to other financial investment options. The features offered is mostly similar to other Savings Scheme offered by the Government but with some tweaks in the rate of interest, tenure and some other features. The Investment doubles on completion of tenure. Although it does not provide any Income Tax deduction and even the interest earned is Taxable.
In this post I will highlight the features and viability of the Scheme.
KISAN VIKAS PATRA (KVP)
Tenure of Investment
118 Months (9 years 10 months)
Rate of Interest/Return
Interest earned is Fully Taxable
Tax Deduction on Investment
Minimum Lock In Period
30 months (2 years 6 months)
In the chart shown above we can look at some of the important aspects of the schemes. Now let’s look at the Scheme in bit more detail.
Who Can Invest in The Scheme
Any Resident Individual for himself or on behalf of a minor;
Any Two Resident Individual can also jointly invest in the scheme.
Where Can You Purchase
In most of the Post Offices across India it is available. In future, even Nationalized Banks will offer the same.
Documents required to be submitted
Individuals will have to conform to the KYC norms. Documents to be submitted are:-
Identity Proof (Passport, Pan Card, Driving Licence, Voter ID Card,etc)
Address Proof (Telephone & Electric Bill, Passport, Voter ID Card, etc)
Passport Size Photo
PAN Card is a must in case of Investment above Rs 50,000/-.
Mode of Payment
Payment can be made through Cash, Cheque or even Demand Draft. In case of cheque or demand draft the KVP certificate will be issued on the date of realization of the amount, but for cash payment it will be issued immediately.
Nomination Facility is also available for the Individuals who prefer to exercise the option.
Option of Transfer of instrument from one post office to another or for that matter branch anywhere in India is also available.
Loan can be availed from Banks by pledging KVP certificates.
Encashment and Payment on Maturity
KVP Certificates can be encashed from the Post Office/Branch it is issued. If it has been transferred elsewhere then from respective Post Office/Branch it can be encashed. The Maturity Amount will be directly credited to your Post Office Savings a/c or Bank a/c as the case may be.
Loss/Damage of Certificate
In case of Loss, Theft of the Certificate an application along with Indemnity bond and identity slip needs to submitted to the Issuing Post Office/Branch. On successful verification of the documents a duplicate Certificate will be issued.
In case of Destroyed/Mutilated/Defaced certificate, the same should be submitted and after successful verification of validity, fresh certificate will be issued.
Pre Mature Withdrawal
The certificate has a minimum lock in period of 30 months (2years and 6 months) after which pre mature withdrawal is possible and you will be paid according to the table given below.
However, it can also be paid earlier (before end lock in period) in the following circumstances:-
Death of the Certificate Holder or any of the holders.
On order by Court of Law.
Forfeiture by a Pledge being Gazetted Government Officer.
Amount Payable on Pre Mature Withdrawal (After 30 months).
2 years 6 months or more but less than 3 years
3 years more but less than 3 years 6 months
3 years 6 months or more but less than 4 years
4 years or more but less than 4 years 6 months
4 years 6 months or more but less than 5 years
5 years or more but less than 5 years 6 months
5 years 6 months or more but less than 6 years
6 years or more but less than 6 years 6 months
6 years 6 months or more but less than 7 years
7 years or more but less than 7 years 6 months
7 years 6 months or more but less than 8 years
8 years or more but but before maturity
No deduction is available on the Investment made in the Scheme. The interest earned is fully taxable. However, No TDS (Tax Deducted at Source) is done if the interest earned is less than Rs 10,000/- in a year.
Investment doubles itself on maturity. It means if you invest Rs 1000/- then on completion of tenure, 112 months (9 years 4 months) you will get Rs 2000/- as maturity amount.
Post Maturity Interest
If the instrument is not redeemed post maturity then the amount will earn simple interest at the rate applicable for Post Office Savings a/c.
Benefits of Investment in the Scheme
It assures fixed rate of return on Investment. The investment amount doubles on maturity.
The process of Investing in the Scheme is simple and easy.
It is one time Investment Scheme, which means you don’t need to regularly deposit in the Scheme.
Has a shorter lock in period when compared with PPF and NSC.
Drawbacks of Investment in the Scheme
It does not provide any Tax Benefit in anyway.
Interest Rate is slightly lower when compared to PPF and NSC IX issue.
Scheme does not provide any additional benefits over the other Savings Scheme like PPF and NSC.
Better Investments options are available in the market.
Banks FD’s provide same benefits or slightly better than KVP.
My Opinion: About Kisan Vikas Patra
KVP is a good instrument for people who don’t have access to other Investment options. But when compared to Investment options like PPF or for that matter even NSC, then I don’t see much merit in this scheme.So I can recommend it only for people who are looking for safe and secure Investment option apart from Bank FD,PPF and NSC.