Kisan Vikas Patra






What is Kisan Vikas Patra?

The Kisan Vikas Patra (KVP) is an instrument that encourages people to invest in long term savings plan. 

Eligibility

  • To invest in KVP, the applicant must be a citizen of India.
  • The investor must be an adult.
  • Minors are not eligible for purchasing a KVP certificate directly. But, adults can purchase it on behalf of a minor.
  • Two adults can purchase a KVP certificate jointly. 
  • KVP Certificate can be purchased only in the name of the investor or on behalf of a minor.
  • A trust can also invest in KVP certificate.
  • Business entities like company and institutions, NRIs and HUFs are not eligible to invest in KVP Certificates. 

How it Works

  • The Single Holder Type KVP Certificate is meant for an adult himself or a minor.
  • The Joint A Type KVP Certificate is issued to join investors, and it is payable to both or the survivor.
  • The Joint B Type KVP Certificate is also issued to join investors, but it is payable to either of the certificate holders or the survivor. 
  • The certificates are sold in the denomination of Rs. 1000, Rs. 5000, Rs. 10000 and Rs. 50000.
  • The minimum investment is Rs. 1000.
  • The current interest rate is 7.6%.
  • The interest is compounded annually.

Maturity and Withdrawal

  • The maturity period is 9 years and 2 months, i.e., 110 months.
  • At maturity, the amount deposited doubles.
  • Premature withdrawal of KVP Certificates is only allowed in case of death of holder, when ordered by a law court or on forfeiture by pledge being Gazette Government officer.
  • Premature withdrawal is only allowed after 2 and a half years or 30 months.
  • The entire interest accrued on one’s deposit is not paid in case of premature withdrawal.
  • In case of premature withdrawal, the amount paid depends on the period of holding the certificate.

Advantages

  • No cap on the amount of investment.
  • KVP Certificates can be used as a collateral to obtain loans.
  • KVP Certificates are transferable from one person to another subject to terms and conditions.
  • For KVP, tax is not deducted at source. 
  • Nomination facility is available.

Limitations

  • The interest rate is not high.
  • The interest earned is taxable.
  • The lock-in period is high.
  • At the time of withdrawal, cash payments are not allowed.

Kishan Vikas Patra is meant for small investors who are looking for guaranteed return and secured interest income. It is safe and has no risks associated with it whatsoever. However, this is not meant for people who are looking for ways to exempt tax or grow their money. There are better instruments to invest with greater interest rates and even tax exemption facilities.

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