Kisan Vikas Patra (KVP)
The government scheme that was originally designed for farmers is now open to all. Kisan Vikas Patra (KVP) is a government-sponsored saving scheme that was initially designed specifically for farmers but is now open to all. Although the name of the scheme suggests that it is for farmers alone, you can also invest in the scheme, save money and accrue interest on your savings.
Kisan Vikas Patra (KVP) is a savings scheme available at India Post Offices in the form of certificates. It is a fixed rate small savings scheme that focuses on doubling your investment after a predetermined period of time (113 months in the currently available issue). The popularity of this scheme is linked to its risk-free nature due to the Government of India guarantee. As per current rules, KVP certificates can be purchased from select public sector banks as well as from India Post Offices.
The following is 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.
Features of Kisan Vikas Patra:
- The KVP scheme is a low-risk saving tool that is safe because it is promoted by the government.
- Certificates are issued for the amount invested in the scheme. The minimum amount that one needs to invest in this scheme is Rs1,000. Investments are to be made in multiples of Rs1,000 as certificates are available in only four denomination—Rs 1,000, Rs 5,000, Rs 10,000 and Rs 50,000.
- The scheme allows you to purchase a certificate for yourself or on behalf of your child or purchase jointly with another adult.
- The interest on the investments in a KVP certificate is decided by the ministry of finance, the Government of India, and is not directly related to market risks. The interest rate was fixed at 7.6 percent compounded annually. If you purchase a KVP certificate today, you will get an interest of 7.6 percent, even if the rate has gone up or dropped at the time of maturity.
- 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. You can also choose to transfer your KVP certificate to someone else.
- Yet another feature of the scheme is that it allows you to nominate a family member who will be eligible to withdraw funds in case of your death.
- 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.
- One can use the KVP certificate as collateral to avail secured loans from Banks, the interest rate is relatively cheaper.
The KVP promises to double your investment in nine years and four months. The scheme is currently offering a 7.6 percent rate of interest on your investments for nine years and four months. The interest is compounded annually.
Investment and Encashment Procedure:
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.
KVP certificates can be easily encashed at the issuer post office. In case of an emergency, the buyer can encash it through other post offices as well. However, the buyer has to produce the identity slip along with the KVP certificate at the time of encashment. One 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.
ID proof has to be submitted as a KYC:
- Voter’s ID
- Driving License or Passport.
Once they verify the documents and receive the deposit, the farmer will get a KVP certificate.