Kisan Vikas Patra (KVP)

Kisan Vikas Patra is a small savings instrument that will facilitate people to invest in a long term savings plan. This scheme was originally introduced by the Government of India in 1988 and was again reintroduced in 2014 with some changes. Even though this scheme was popular, a Government Committee formed in 2011 suggested that KVP could be misused for purposes like money laundering. In 2014, Kisan Vikas Patra was relaunched with a number of changes including mandatory PAN Card proof for investments over Rs.50,000 and income source proof for investments exceeding Rs.10 lakh. The main advantage of opening a KVP investment is the availability and ease of process – the Small Savings Directorate offers KVP certificates in all Post Offices across the country. Any resident Indian can invest in a KVP scheme and can obtain a certificate either jointly, individually or in the name of a minor. The principal amount invested in KVP will be doubled in a time of 8 years and 4 months or 100 months. The main target audience for this scheme is people in semi-urban and rural areas where people easily fall prey to Ponzi schemes.

Kisan Vikas Patra Benefits:

• A KVP certificate is offered in multiple denominations that gives flexibility to the customers. The denominations vary from Rs.100 to a maximum of Rs.50,000
• It is a scheme offered by the Government of India and hence the investor can be sure of returns on invested amount. Under KVP, the holder will get double the principal in a short period of eight years and four months
• People who are looking for risk free investment option will benefit from KVP scheme. Also, it is unaffected by inflation as the interest rate remains the same
• There is no cap on the amount that one can invest in KVP. Depending on the purchase power, a person can buy any amount
• Kisan Vikas Patra certificate can be presented as collateral against loans. Investors can use the same to obtain a loan from banks
• Applicants also have the option to withdraw the amount prematurely in KVP. The lock in period is two years and six months
• Kisan Vikas Patra is transferable from one person to the other. To pass on the benefits to the new holder, the owner must fulfil all required formalities. Before transferring it to a new holder, it is important to receive an approval at the post office
• A KVP holder can enjoy tax benefits. The income from KVP is taxable but there is no tax deduction on entire money received at maturity, there is no tax deduction at source

Kisan Vikas Patra Eligibility:

1. The applicant must be an adult and a resident Indian.
2. The applicant can apply for Kisan Vikas Patra on his own name or on behalf of a minor.
3. Trusts are eligible to invest in Kisan Vikas Patra. HUFs (Hindu Undivided Family) and NRIs are not eligible to invest in KVP

Pro and Corns of Kisan Vikas Patra:

1. The current interest rates on bank fixed deposits for 8 year term are around 8.5% (around 9% for senior citizens). People can expect reduction in interest rates by RBI in the coming quarters. Even if RBI reduces interest rates, the expected annual yield on Kisan Vikas Patra which is 8.67% is not a great return on investment
2. Also, investments in KVP are not eligible for any tax benefits under Section 80c. If people really want to invest in a safe investment avenue then person can book a 5 year Bank Fixed deposits and get tax benefits too
3. KVP does not have tax benefits and Lock-in period is applicable
4. Consider investing in Public Provident Fund (15 years lock-in will be there) if safety is priority
5. Person can consider investing in National Savings Certificate (NSC – 5 years) which is available at 8.5% interest rate. Also, it has tax benefits too (under section 80c)

Kisan Vikas Patra Application Procedure:

1. Kisan Vikas Patra is available across the country and post offices, nationalized banks, state banks and associate banks. An applicant willing to invest in KVP can visit the nearby post office or nationalized bank and fill out the application form
2. The deposit for KVP is possible in the form of cash, cheque or demand draft. It is essential to provide complete data in the application form. In the event of minor, it is necessary to mention the current age of the applicant (minor) and the relationship
3. Those who intend to include a nominee can also provide the respective details in the form. Upon submitting, the application form along with the photographs, the post office or the bank will issue the certificate called Kisan Vikas Patra. The certificate contains the details of the applicant, the invested amount, date of maturity and the amount received by the applicant on maturity
4. A group of people or a trust is also available to open KVP. Two individuals can jointly open a single KVP. Parents or guardians can open the small savings account in the name of a minor. Overall, every citizen of India is eligible to apply for the savings scheme introduced by the Government of India.
5. Applicants submitting the application form with cash or demand draft will receive a certificate on the same day. At the time of issuance, the holder will also receive an additional identity slip
6. The identity slip will act as a proof and function efficiently in case of loss of the original certificate. Upon providing, the identity slip, the post office or the bank will issue a duplicate. Furthermore, the slip also helps in encashment of the maturity value at the time of maturity

Reference & Details:

1. For more information visit official site: https://www.indiapost.gov.in/Financial/Pages/Content/KVP.aspx