Kisan Vikas Patra – Eligibility, Features, Interest Rates & Returns
About Kisan Vikas Patra
Kisan Vikas Patra is a small savings instrument that facilitates people to invest in a long-term savings plan. This scheme was introduced by India Post in 1988. 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 KVP investment is the availability and ease of process; KVP certificates are issued in Post Offices across the country. Any resident Indian can invest in a KVP scheme and can obtain a certificate either jointly or individually, or in the name of a minor. The principal amount invested in KVP will be doubled in 9 years and 4 months (i.e. 112 months) from when they were issued. The main target audience for this scheme is people in semi-urban and rural areas.
Who should invest in the KVP scheme
Any Indian citizen above age 18 can buy a Kisan Vikas Patra from the nearest post office. People from rural India (with no bank account) find this particularly appealing. You can also buy one for a minor or jointly with another adult. Don’t forget to mention the date of birth of the minor and the name of the parent/guardian. A Trust can also buy one, but not an HUF or an NRI. KVP is a good choice for risk averse individuals, who have surplus money, which they may not require in the near future. It all depends on your risk profile and goals.
For instance, people seeking tax-saving schemes have better options like Public Provident Fund, National Saving Certificates and tax saving bank FD Schemes. If you are open for some level of risk exposure, you have the Equity Linked Savings Scheme (ELSS). Hence, play to your financial strengths.
Kisan Vikas Patra Types
According to the National Savings Institute, there are three types of KVP certificates.
Single Holder Type Certificate: This type of KVP is issued to an adult individually for self or on behalf of a minor.
Joint A Type Certificate: This type of KVP is issued to 2 adults jointly and is payable to both the owners or to the survivor.
Joint B Type Certificate: This type of KVP is issued jointly to two adults and is payable to either of the owners or to the survivor.
Kisan Vikas Patra Eligibility
The following are the eligible for Kisan Vikas Patra:
a. The applicant must be an adult and a resident Indian.
b. The applicant can apply for Kisan Vikas Patra in their own name or on behalf of a minor.
c. Trusts are eligible to invest in Kisan Vikas Patra. HUFs (Hindu Undivided Family) and NRIs are not eligible to invest in KVP.
Kisan Vikas Patra Maturity Period
The maturity period for Kisan Vikas Patra that was introduced in 2014 is 8 years and 4 months. On maturity, the amount invested gets doubled. If you invest an amount of Rs.10,000, after a period of 8 years and 4 months, the amount will increase to Rs.20,000. The current interest rate of Kisan Vikas Patra comes down to 7.7%, therefore, the invested amount will double in 9 years and 4 months (i.e. 112 months) for Q1 of FY2019-20.
Kisan Vikas Patra Form
In order to purchase a Kisan Vikas Patra certificate, one must fill in the application form and furnish the required information. The required information must be provided in the identity slip also. In the application form, you will be required to mention the following details:
- The amount for which KVP certificate is to be purchased.
- Type of KVP certificate, whether it is single or joint “A” or joint “B”
- The method of payment which can be either cash or cheque
- The name of combined owners if KVP type is not single
- In case of minor, the date of birth of the minor and his guardian who can encash KVP amount
- Name of all nominees with full address and date of birth
This form must be duly signed by the investor. The date, address, and signature of witness to nomination will also be specified in the slip.
In the identity slip, information like the serial number of KVP certificate, issue price, date of encashment, and postmaster signature and remarks like that of duplicate issue and transfer will be mentioned. To encash the KVP, one must present the identity slip. Hence, mentioning the right details in KVP identity slip and KVP Form is of utmost importance.
Features, Interest & benefits of Kisan Vikas Patra
Guaranteed returns
Regardless of the market fluctuations, you will get the sum guaranteed. As this scheme was originally intended for the farming community, the priority was to encourage them to save for rainy days.
Capital protection
It is a safe mode of investment and not subject to market risks. You will receive the investment and gains when the tenure ends.
Interest
The effective interest rate for Kisan Vikas patra varies depending on the number of years invested in KVP at the time of purchase. The current interest rate is 7.7% for the quarter 1 October 2018 to 31 December 2018 prior to which the rate was 7.3%, compounded yearly. By compounding the interest, you will receive more returns on your deposit.
Tenure
The maturity period for Kisan Vikas Patra is 118 months and you can avail the corpus then. The maturity proceeds of KVP will continue to accrue interest till you withdraw the amount.
Taxation
It doesn’t come under the 80C deductions, and the returns are completely taxable. However, Tax Deducted at Source (TDS) is exempt from withdrawals after the maturity period.
Rules to premature withdrawal
You can withdraw the amount after 118 months. But the lock-in period is 30 months. Encashing the scheme early is not allowed, unless in the account holder’s demise or court order.
Ease & affordability
KVP is available in denominations of Rs. 100, Rs. 500, Rs. 1000, Rs. 5000, Rs. 10,000 and also Rs. 50,000 for investment. There is no maximum limit. Please note that denominations of Rs. 50,000 are available only at the head post office of a city.
Loan against KVP certificate
You can use your KVP certificate as collateral or security to avail secured loans. The interest rate is comparatively lesser for such loans.
Nomination facility
Collect a nomination form from the post office, and fill up the required information of the nominee. If you are nominating a minor, mention the date of birth.
KVP certificate issuance
If payment is done through cash, they issue the KVP Certificate on the spot. And for Cheque, Demand Draft or Money Order, you will have to wait till the amount is cleared to the post office.
KVP Identity Slip
This includes the Kisan Vikas Patra Certificate, the KVP serial number, the amount, the maturity date and the amount to be received on the date of maturity.
How to invest in Kisan Vikas Patra & the documents required
Investing in Kisan Vikas Patra is simple, as mentioned below. Collect the application form (Form-A) and submit it duly filled to the PO. If the investment in KVP is through an agent, then the agent should fill Form-A1. You can download these forms online. The Know Your Customer (KYC) process is mandatory and you need to submit the ID proof copy (PAN, Aadhaar, Voter’s ID, Driving License or Passport). Once they verify the documents and receive the deposit, you will get a KVP certificate. Keep this safe as you will need to submit this at the time of maturity. You can also request them to send you the certificate by email.
In short, if Kisan Vikas Patra seems like a worthwhile investment that matches your financial goals, invest immediately. It is easy enough to open and manage. All you need to do is have the amount ready and pay one visit to the nearest post office. In short, if Kisan Vikas Patra seems like a worthwhile investment that matches your financial goals, invest immediately. It is easy enough to open and manage. All you need to do is have the amount ready and pay one visit to the nearest post office.
Loan Against KVP
A holder of Kisan Vikas Patra can avail a loan against the same. The following are the conditions for availing a loan against KVP:
i. The loan applicant must have a Kisan Vikas Patra under his own name.
ii. The loan against KVP can be availed for business or personal purposes only. The loan cannot be availed for any speculative ones.
iii. Different banks have different charges and interest rates for loans against KVP. The charges vary from time to time and select banks may charge processing fee for loan grant.
iv. The loan should be repaid within the tenure of KVP.
v. The margin and loan amount will be decided by the bank based on the KVP investment and maturity.
Also Read: Post Office Monthly Income Scheme ( POMIS )
KVP rules and guidelines
Following are the rules and guidelines to be followed for those seeking to or holding a KVP certificate:
Application: A KVP certificate cannot be purchased online. The application form for a certificate can be found online. It is known as Form A. Download the form and fill up the details. Submit the filled-up Form A at the nearest post office or one of the banks that offer the scheme. You can also ask for Form A for KVP at the post office or bank.
Certificate: Once you submit the Form A and make the payment, you will be issued a KVP certificate. It is governed by the Government Savings Certificate Act of 1959. The certificate is a government assured proof that the returns promised to you will be given to you at the end of the maturity period. You need to keep it safely or carefully and produce it at the time of withdrawal.
Types of accounts: You can open three types of accounts. The first kind is the ‘Single Holder’ type, where the certificate is issued in the name of an adult or on behalf of a minor. The second one is the ‘Joint A’ type, where the certificate issued in the name of two adults. Upon maturity, either both account holders will receive the money or the survivor among the two will. The ‘Joint B’ type certificate is also issued in the name of two adults. However, in this case, either of the two is eligible to get the money or whoever is the survivor gets it.
Investment: The minimum mount for which you can buy a certificate is Rs1,000. There is no upper limit on the investment. It has to be in multiples of Rs1,000. Certificates are issued in the denominations of Rs1,000, Rs5,000, Rs10,000 and Rs50,000. Any investment above Rs50,000 will require PAN details of the investor.
Nomination: Investors are allowed to nominate a family member or friend for the certificate. The nominee will hold the certificate in case the primary certificate holder dies. The nominee will also receive the total funds upon maturity.
Maturity period: The maturity period is fixed at 112 months, which is equal to nine years and four months.
Withdrawal rules: You can withdraw the return amount at the end of the maturity period. You can also withdraw it prematurely. In case you withdraw the funds within a year of purchasing the KVP certificate, you will not get any interest and a penalty will be imposed. If you withdraw after a year but before two and a half years of purchasing the certificate, no penalty will be imposed but the interest you receive will be reduced. Withdrawal after 2.5 years of buying the certificate does not invite any charges or penalties. You will receive interest as promised.
Encashment of certificate: You can encash your KVP certificate at the post office or bank branch where you purchased the certificate. However, in case of emergency, you can also encash it any other post office or branch, upon the approval of the postmaster or manager of the branch. Loss of certificate: In case of loss or damage or wear and tear of a certificate, the investor can apply for a duplicate. You must know the certificate number and the date of maturity before applying for a duplicate. The application can be made at the branch where the certificate was purchased.
FAQs
1. How can I buy KVP?
One can purchase a KVP certificate from the nearest post office or one of the select banks that offer the certificate. That makes the scheme easy to access. In case you have to move out of the city where you purchased the certificate, you can your certificate transferred from one post office to the other.
2. What is the interest rate of KVP?
The current interest rate applicable to KVP is 7.6% per annum which will double your investment in 113 months.
3. Is KVP available in banks?
KVP can be transfer from one post office to another anywhere in India and of nomination will be available. One can avail loans on KVP from the banks and in other case where security is required to be deposited. Liquidity: Investor can encash his certificates after the lock-in period of 2 years and 6 months.