This post was most recently updated on January 1st, 2023
Kisan Vikas Patra a.k.a. KVP is a popular investment choice amongst conservative investors who invest in small savings schemes. In this article, we will go through some of the key features, benefits, Eligibility, and much more.
What is Kisan Vikas Patra?
Launched in 1988 Kisan Vikas Patra is a small savings scheme by Govt of India.
During its launch, the scheme was mainly targeted at farmers to give them financial stability but with time the scheme was opened to the general Indian public for investment.
This scheme is popular among very conservative investors who are looking for safe and secure returns on their investments.
Kisan Vikas Patra interest returns calculator
Use the below Kisan Vikas Patra interest returns calculator to check how much return you can expect from your investments.
What are the types Of Kisan Vikas Patra Scheme Accounts?
The KVP Scheme accounts are of three types:
- Single Holder Type Certificate: This kind of certificate is issued to an adult for themself or on behalf of a minor or to a minor.
- Joint ‘A’ Type Certificate: This type of certificate is issued jointly to two adults, payable to both the holders jointly or to the survivor.
- Joint ‘B’ Type Certificate: This type of certificate is issued jointly to two adults, payable to either of the holders or to the survivor.
What Is The Eligibility Criteria For The Kisan Vikas Patra Scheme?
The following are the eligibility criteria for investing in the KVP scheme:
- The applicant has to be an adult resident of India.
- A parent/guardian may invest on behalf of a minor.
- Hindu Undivided Families (HUFs) and Non-Resident Indians (NRIs) cannot invest in Kisan Vikas Patra.
What are the advantages of the Kisan Vikas Patra/KVP Scheme?
The main benefits of Kisan Vikas Patra are:
- Assured returns: Irrespective of market fluctuations, individuals who have put their money into this scheme would generate a guaranteed sum as the scheme is backed by Govt of India.
- Compounding interest: The interest rate of the KVP Scheme tends to vary, and such variations depend on the year an individual invested in it. The rate of interest effective from 01/01/2023 is 7.2%. The interest accrued on the invested sum is compounded yearly, ensuring more returns to individuals.
- Maturity time: The time horizon of the KVP scheme is 124 months. After completing the said period, the scheme matures and extends a corpus to a KVP scheme holder. In case, individuals decide to withdraw the proceeds generated later than the maturity period; the amount would accrue interest until it is withdrawn.
- Cost of Investment: Individuals can deposit money into this scheme with as little as Rs. 1,000 and invest as much as they want to. However, the amount has to be a multiple of Rs. 1,000, and a sum over Rs. 50,000 would require PAN details and would be extended by a city’s head post office.
- Taxation method: An amount that is withdrawn post maturity is exempted from Tax Deducted at Source or TDS. However, the KVP scheme is not entitled to any tax deductions mentioned under Section 80C.
- Nomination: Individuals can select a nominee in this scheme. All they would need to do is fill up a nomination form, offer the required details of their choice of nominees and submit it. Also, Individuals can even select a minor as their nominee.
- Loan against a certificate: Individuals can avail of a loan against their investment in the Kisan Vikas Patra scheme. The KVP certificate would act as collateral while applying for a secured loan and individuals would be able to avail of a loan at a lower interest rate
Check the Latest small savings scheme interest rates in the Post Office.
What are the disadvantages of Kisan Vikas Patra?
The Kisan Vikas Patra (KVP) is a small savings scheme offered by the Government of India, which allows individuals to invest a fixed amount of money and earn a fixed rate of interest over a set period of time. While the KVP can be a convenient and secure investment option, it also has some disadvantages to consider:
- Low returns: The KVP offers a fixed rate of interest, which may be lower than other investment options such as mutual funds or stocks. This means that the returns on the KVP may not keep pace with inflation, which can erode the value of your investment over time.
- Long lock-in period: The KVP has a long lock-in period, which means that the investment cannot be withdrawn before the maturity date. This can be a disadvantage for those who may need access to their funds before the end of the lock-in period.
- Limited flexibility: The KVP is a fixed investment, which means that you cannot make additional contributions or change the investment amount once it is set. This can be a disadvantage for those who may want more flexibility in their investments.
- Tax implications: Interest earned on the KVP is taxable, which can reduce the overall returns on the investment.
Consider reading – 13 Safe investment options with high returns
What are the documents required to open Kisan Vikas Patra account In 2023?
Eligible individuals can avail of the KVP scheme in 2023 by offering the required documents.
Here is a list of documents that are necessary for the same:
- Form A must be duly submitted to an India Post Office branch or other specific authorized banks.
- Form A1, if the application is extended through an agent.
- Age proof (Passport, Aadhaar, PAN, etc.)
- Address proof (Aadhaar, Passport, electricity bill, telephone bill, ration card, etc.)
- Photo identification proof (Aadhaar, voter id, PAN, Passport, driving license, etc.)
Where can someone open the Kisan Vikas Patra account?
KVP account can be opened in the Post office or any authorized bank. If you fulfill the eligibility criteria then you can go to the post office or the authorized bank and fill in the necessary forms to open the account.
What is the Withdrawal Procedure for Kisan Vikas Patra?
As of January 2023; The KVP scheme matures after a maturity period of 120 months. But there are early maturity options available as below:
What are the premature options available for Kisan Vikas Patra?
If an individual opts to withdraw their investment sum within a year of purchase, they will not accrue any interest on it. Rather, they would incur a penalty for it.
If an individual opts to withdraw their invested sum after one year, but before 2.5 years of purchase, they would receive a low rate of returns. No additional charges or penalties would be imposed on it.
If individuals decide to withdraw their investment from the Kisan Vikas Patra scheme after 2.5 years of availing it, they would receive the promised rate of returns and would not have to pay the penalty on it.
Individuals can encash their KVP certification, provided they go to a post office or a bank branch from where they purchased it in the first place. If an emergency arises, they can get the certification encashed from any post office or bank branch but only after availing the approval of the post manager or respective bank manager of the said institution.
Are KVP certificates transferrable?
Yes, KVP certificates are transferrable from one post office to another one, anywhere in India, and from one person to another.
In case of the latter, i.e. transfer from one person to another, the following cases are permissible, but a letter in this regard needs to be submitted:
- Transfer from one owner to joint holders
- Transfer from joint holders to one of the holders
- Transfer from the name of the deceased to his legal heir
- From the joint holder/s to the judge of law and also to other individual/s as ordered by the Court of Law
FAQs on Kisan Vika Patra
What is the interest rate for kisan vikas patra?
The latest interest rate for KVP effective from 01-01-2023 is 7.2%
How to buy kisan vikas patra / KVP online?
Unfortunately, the Kisan Vikas Patra certificate can not be purchased online. Investors will have to visit the post office or the authorized bank to purchase the Kisan Vikas Patra certificate.
What is kisan vikas patra / KVP maturity period?
As of January 2023; The maturity period for KVP is 120 months.
Is it good to invest in the Kisan Vikas Patra scheme?
If you are an ultra-conservative investor and do not want to take any risk whatsoever for your investments then you can consider investing in KVP for slightly higher interest rates than FD.
What are some disadvantages of Kisan Vikas Patra / KVP?
The main disadvantage of KVP is the maturity period, It's 10 yrs. Although you have an option for early withdrawal waiting for KVP to mature to get benefit is not suitable for an investor who is looking for good returns on his/her investment.
KVP is also not tax efficient i.e. any gains from KVP will be added to your income for tax calculation.
Is Kisan Vikas Patra better than FD?
If you compare KVP with FD then KVP offers a higher interest rate than FD but if you looking to invest in KVP for a premature withdrawal then the experience of premature withdrawal in case KVP is not simple. In the case of FD, you can withdraw your money at any time.