What is Kisan Vikas Patra (KVP)?
Kisan Vikas Patra is a savings scheme launched by India Post in 1988 for farmers. It was discontinued in 2011 and reinitiated in 2014 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 scheme aims to provide stable returns at minimal risk. It is a long-term instrument that guarantees doubled returns on your investment — provided you stay invested from onset to maturity.
Any Indian resident aged 18 years and above can purchase a KVP certificate individually or jointly with an eligible person. One can operate the KVP for 123 months. Premature closure of the account is allowed after 30 months of investing. In case of untimely demise, the enlisted nominee will receive the maturity amount.
The interest rate on KVP is reviewed and updated periodically. The current Kisan Vikas Patra interest rate is 6.9%%, compounded annually.The KVP certificate can be transferred from one post office to another and from person to person.
While there is no upper limit for how much you can invest in the Kisan Vikas Patra, a minimum investment of Rs.1000 is mandatory.
There are several advantages of KVP, the most distinguishing one being the fact that KVP certificates can be pledged as collateral for loans.
And for those of you wondering how to purchase a Kisan Vikas Patra, it can be purchased online and offline through any post office and specific bank branches such as SBI, PNB, etc.
KVP Scheme Basic Information
|Eligibility||Any Indian resident above 18 years of age.Trusts (NRIs and HUFs are not eligible).Minors above 10 years of age.Adults above 18 on behalf of a minor.|
|Tenure||123 months currently (subject to change as per government announcements)|
|Current Interest Rate||7.0%|
|Premature Closure||After two years and six months|
|Minimum Investment||Rs. 1000|
|Maximum Investment||No upper limit|
|Tax Deduction||No TDS.No tax exemption on interest income.No tax on the withdrawal.|
|Nomination||Nomination Facility Available|
|Transferability||It can be transferred from person to person or from one post office/branch to another.|
Types of Kisan Vikas Patra Accounts
There are three types of Kisan Vikas Patra accounts. The same are listed below:
Single Holder Certificate
This certificate is given to a single adult in their name. Further, it can also be issued to the adult on behalf of a minor.
Joint A Certificate
Two adults are issued this certificate jointly, with both receiving the payout at maturity. In case of the death of one subscriber, the other subscriber will receive the entire proceeds.
Joint B Certificate
This certificate is given to two adults, either one of whom can receive the payout. In case of one subscriber’s untimely demise, the other subscriber will receive the entire payout.
How to Open a Kisan Vikas Patra Account?
- You can obtain the Kisan Vikas Patra form by visiting the nearest post office or bank branch. In addition, you can also download the application form from the India Post website.
- After receiving the form, you must fill it out and attach the relevant documents.
- You will then have to visit the nearest post office and submit the Kisan Vikas Patra form and the invested sum via a Cheque/Demand Draft/Cash/Pay Order. Ensure that the application is addressed to the postmaster.
- The post office will then scrutinise the form, and if the payment is in cash, the certificate will be issued immediately.
- In case the payment is done by cash, you will receive a provisional receipt, which you can exchange for the certificate later.
- You can also opt to receive your certificate on your registered email id. There is no limit to the number of Kisan Vikas Patra accounts you can open.
As can be seen, there is no provision to obtain a Kisan Vikas Patra online without visiting the post office. You may however save time downloading the form instead of waiting in long queues to get it from the post office or bank branch.
Documents Required for KVP Scheme
You will have to share the below documents along with the Kisan Vikas Patra form:
- Proof of Identity such as PAN/Driving Licence/Aadhar/ Passport.
- Proof of Address such as PAN/Driving Licence/Aadhar/ Passport/Rental Agreement/Electricity Bill.
- 2 Passport size photographs.
- If the account is on behalf of a minor, then their proof of age.
- Carrying your PAN is mandatory if the investment amount is more than Rs. 50000.
- If your investment amount exceeds Rs.10 lakhs, then payslips and ITR might be required.
Benefits of Kisan Vikas Patra
The key Kisan Vikas Patra benefits include:
Guaranteed stable Returns
The final value of the certificate is solely based on the tenure and applicable Kisan Vikas Patra interest rate. Therefore, the scheme returns are stable with no surprises at maturity.
Long Term Investments
You can invest for a maximum tenure of 123 months. At the end of the Kisan Vikas Patra maturity period, you receive the principal and the accumulated interest as a lump sum. This ensures that your corpus keeps compounding and snowballing in size.
There is an option to appoint a nominee for your KVP account. This nominee will receive the proceeds of your corpus in case of your untimely demise.
The Kisan Vikas Patra scheme is backed by India Post and hence it entailos low-risk, with very low chances of default. The returns can be assumed to be more or less assured.
India has a network of post offices in every state. This makes it easy for you to invest in Kisan Vikas Patra if there are no bank branches near you. It is also easy to transfer your account from one post office to another if your residence changes in the future.
No Upper Limits
There is no cap on the maximum amount you can invest in the scheme. However, you will have to share your PAN card if you contribute more than Rs.50000 and ITR and payslips if the investment amount exceeds Rs.10 lakhs.
You can avail of a loan by pledging your Kisan Vikas Patra certificates. Many banks allow borrowing up to 80% of the value of deposited amount in KVP. The interest rates vary from bank to bank. The loan must however be repaid no later than completing the residual maturity period.
The corpus withdrawn at the end of the Kisan Vikas Patra maturity period is exempt from taxes. Although no TDS is deducted from the interest income, it is not exempt from income tax. This saves the hassle of applying for refunds if your net income falls in tax-free brackets.
Limitations of KVP
There are some limitations to investing in Kisan Vikas Patra. The same are listed below:
The amount invested in Kisan Vikas Patra is not exempt from income tax under 80-C of the Income Tax Act, 1961. This makes it less preferred than other tax-saving instruments such as National Savings Certificate, Public Provident Fund, etc.
The lock-in period of ten years and three months is on the higher side when compared to FDs, which can be broken at any time.
Relatively lower interest
The Kisan Vikas Patra’s interest rate is lower than savings instruments such as the National Savings Certificate, Sukanya Samriddhi Yojana, etc.
The instrument’s long-term nature means that the actual return could be negative in inflationary economies as real return is nominal return adjusted for inflation.
Also Read: Post Office Scheme to Double the Money
The Kisan Vikas Patra is a scheme encouraging long-term investments for a fixed return. Its risk-free nature makes it an ideal choice if you are risk-averse. The best part is that you can sign up for KVP from even the remotest parts of the country where there are no bank branches. Further, you can nominate someone to your KVP account and secure them financially in the event of your demise.
On the other hand, the KVF is not entirely online, as you need to physically visit a post office to submit the form. However, you can download the account opening form online, saving some of your effort waiting in long queues.
Nonetheless, you must know the general limitations of investing in any instrument while deciding to park your funds with it. Only if you are reasonably sure that you can afford to lock in your funds for the long term and are risk averse should you consider investing in Kisan Vikas Patra.
While there is no penalty if you need to close the scheme after 2.5 years of investing in it, the promise of doubling the amount invested is only fulfilled if you invest for the entire tenure.
FAQs about KVP
How can I apply for a duplicate KVP certificate?
You can apply for a duplicate certificate at any post office branch and not necessarily from the one where you bought the original certificate. You will have to submit a form NC-29 along with the below documents:
Valid ID and residence proof.
FIR copy for the loss of the original KVP certificate.
The identity slip that was shared with you when the certificate was issued.
What are the minimum and maximum amounts I can invest in a KVP?
The minimum amount is Rs. 1000; however, there is no upper limit to the maximum amount you can invest. You will only have to share your PAN if the investment amount is more than Rs.50000. Also, you will have to share your payslips, and IT returns if the amount exceeds Rs. 10 lakhs.
Is investment in Kisan Vikas Patra exempted from taxation under section 80-C of the IT Act?
The income invested in KVP is not exempt from taxes under section 80-C of the Income Tax Act. The interest income is taxable, though no TDS is deducted by the bank/post office. The withdrawal amount, however, is entirely exempt from any taxation.
To whom do I address the Kisan Vikas Patra online form?
You have to address the KVP online form to the postmaster of the post office branch at which you want to buy the KVP.
In what circumstances does my KVP account get transferred to someone else?
Your KVP account can get transferred under the following situations:
In case of your demise, the KVP gets transferred to your legal heir or the nominee in your account.
In the case where the court directs the transfer.
What if I do not encash the certificate on maturity?
In case you do not choose to withdraw your funds at maturity, you continue to receive an interest equal to the interest rate applicable on the post office savings account. However, if you withdraw within one month of maturity, you do not receive this interest.