Kisan Vikas Patra (KVP), one of the most popular small saving instruments in India, was re-launched by the Government on 18 November 2014. This article covers the features of Kisan Vikas Patra, Why was Kisan Vikas Patra discontinued, Why was Kisan Vikas Patra relaunched? Comparison of KVP with similar products like NSC,PPF,Fixed Deposits
Features of Kisan Vikas Patra or KVP
- Initially KVP will be available from the post offices but will soon be made available in Banks. Bank means any branch of State Bank of India and its associate banks, designated branches of Nationalised and other commercial banks, authorized for Public Provident Fund Scheme.
- It is available in the denominations of Rs. 1000, Rs. 5,000, Rs. 10,000 and Rs. 50,000. There is no upper limit on investment in KVP.
- The investment made in KVP will double in 100 months i.e it will have a maturity period of 8 year and 4 months. This means KVPs would be giving a return of 8.7 per cent annually.
- As of now, only individuals allowed to invest in KVP. It is not available for HUF, NRIs or companies.
- Investors would NOT get any tax benefit for their investment in Kisan Vikas Patra.
- Earned interest at the end of maturity will be taxable income ,taxed according to one’s tax slab, exactly like Bank FDs or NSC.
- Earlier no tax was deducted at source(TDS) on the interest of KVP. Newspaper reports said 10% TDS will be there at the time of maturity in new avtaar of KVP but official information does not mention it.
- Kisan Vikas Patra certificates can be issued in single or joint names. Types of Kisan Vikas Patras (KVP)
- Single holder certificate-This certificate will be issued to an adult for himself, on behalf of a minor, or to a minor.
- Joint A type certificate-This certificate will be issued jointly to two adults and payable to both adults jointly or to the survivor.
- Joint B type certificate-This certificate will be issued jointly to two adults and payable to either of the holders or to the survivor.
- Kisan Vikas Patra can be encashed after a lock-in period of 30 months or 2 years and 6 months. Thereafter, investors can withdraw in any block of six months.
- One can transfer from one post office or bank to another anywhere in India.
- Nomination is available at any time after the purchase of the Certificate but before its maturity, by means of an application to the Post Master or Bank Officer of the office where the Certificate was registered. Nomination can also be changed. No fee shall be charged for the nominations made first time, but a fee of Rs. 20 per subsequent nomination or cancellation shall be charged by the Post Office or Bank.
- Kisan Vikas Patra can be transferred from one person to other person(s), multiple times, with the consent in writing to an officer of the Post Office or Bank where the certificate was registered.
- Kisan Vikas Patra certificates can also be pledged as security to avail loans from the banks. When any Certificate is transferred as security, the Post Master or Bank Officer of the office of the registration shall make the following endorsement on the Certificate :- Re-transferred to ………………………………………………….
Official Information about Kisan Vikas Patra from Finance Ministry website
Why was KVP discontinued?
Earlier, it was launched by the Government on April 1, 1988. The scheme provided facility of unlimited investment by way of purchase of certificates from post offices in various denominations. The maturity period of the scheme when launched was 5 ½ years and the money invested doubled on maturity.
The scheme was very popular among the investors and the percentage share of gross collections secured in KVP was in the range of 9 per cent to 29 per cent against the total collections received under all National Savings Schemes in the country. Gross collections under the scheme in the year 2010-11 were Rs. 21,631.16 crore which was 9 per cent of the total gross collections during the year. In the year of its closure, the scheme secured gross collections of Rs. 7,575.95 crore (April 2011 to November 2011).
KVP was disbanded in November 2011 on the recommendation of the Shyamala Gopinath committee on comprehensive review of national small savings fund, over concerns KVP might be used to get black money into the system
Have the things changed from 2011 for KVP to be relaunced?
In these four years, KYC norms have only become stricter. As part of KYC requirements, post offices ask for identity and address proof. A deposit of Rs 50,000 and above requires PAN details and a deposit above Rs 10 lakh requires additional proof of the source of income. It is hoped that these norms will deter people trying to route black money through the scheme.
Why is KVP being relaunched?
“In the last 2-3 years, savings rate in country has declined from a record high of 36.8 per cent to below 30 per cent. It is, therefore, necessary to encourage people to save more” Finance Minister Arun Jaitley said during the launch of the revamped Kisan Vikas Patra. The collections under the scheme would also help the government mobilise funds for financing developmental plans.
Comparison of Kisan Vikas Patra
The KVP may be a good option for the un-banked population but is not a practical one for those who are net savvy.
- For buying, nominating,redemption It needs a physical presence that too at the Post office/Bank where the certificate was registered. especially when the internet has made convenience the key. You can encash it in the same post office or bank where it is registered. In case of the different bank branch or post office then it may get delayed as the internal verification is required.
- You get a physical certificate which you need to keep safe for entire duration. Yes you can get a duplicate one but then again you need to go to post-office/bank where it was registered.
- Comparison with PPF An annualised return of 8.7 per cent is comparable to a Public Provident Fund (PPF). Additionally, the liquidity is higher with a two-year lock-in period vis-a-vis 15 years in case of a PPF account. Further, there are no tax benefits included in KVPs. PPF, on the other hand, falls under the EEE category and gets tax exemption on investment and maturity. The interest earned through PPF is also tax-free and so is the maturity amount. Our article Understanding Public Provident Fund, PPF talks about PPF in detail.
- When compared to the current 5-year tax saving FDs (SBI gives an 8.75%), the KVPs still look bad in terms of returns and tax benefits. Our article Fixed Deposits and Tax talks about Fixed Deposits and Tax in general while Tax Saving Fixed Deposits talks about tax saving fixed deposits in detail.
Comparison of KVP with NSC, PPF and Fixed Deposits is given below.
| Scheme | Interest Rate | Time Period | Tax Benefit at investment | Tax benefit at maturity | Premature Withdrawal |
| KVP | 8.7 | 8 years and 4 months | No Tax benefit | Interest is taxable | After 2 years and 6 months |
| NSC5 Yrs | 8.7 | 5 years | Tax benefit under 80C | Interest is taxable | Allowed under certain conditions |
| NSC10 Yrs | 8.7 | 10 years | Tax benefit under 80C | Interest is taxable | Allowed under certain conditions |
| PPF | 8.7 | 15 years | Tax benefit under 80C | Tax free | Partial Withdrawal after 6 years |
| Bank FD | 8.7 | 10 years | Tax benefit under 80C if Tax saving FD | Interest is taxable | After 2 years and 6 months |
Related Articles:
- Understanding Public Provident Fund, PPF
- What are National Savings Certificate (NSC)
- Choosing Tax Saving options : 80C and Others
- Fixed Deposits and Tax
- Investing : Articles about Investing organized topicwise for your convinence.
What do you feel about Kisan Vikas Patra being relaunched? Will you invest in it? What about investing in name of child/minor?How do you choose investing options? Looking forward to your comments, feedback and questions.
Sir I have invested 25000 in KVP in 2009 and it was of 5and half year but I forgot to withdraw the amt now its 2016 April how much I will get plz reply me
Are you sure it is KVP. The investment made in KVP will double in 100 months i.e it will have a maturity period of 8 year and 4 months.
Sir, I have taken KVP in the year 2009 which is yet tobe matured in 2017. Whether those KVP certificates still valid, or has to be surrendered in view of introduction of new KVP by the govt. Pl.clarify me in the matter immediately.This is first time to seek clarification, not duplicate one.
They are still valid from my understanding. I had earlier version of NSC when the duration of NSC was 6 years and they are still valid and they follow the old maturity period.
Thank you Sir for your input.
Yes you are right KVP are still available for investment. Once you buy the KVP interest gets locked just like FD. New interest rate are for the new KVP buyers.
Sir, I have taken KVP in the year 2009 which is yet tobe matured in 2017. Whether those KVP certificates still valid, or has to be surrendered in view of introduction of new KVP by the govt. Pl.clarify me in the matter immediately.
Dear Sir,
I hold a KVP (from a post office in my home town)
principal amount 50,000
Maturity amount=1 lac
To be matured in July-2015
It was in my mother’s name and she died few years ago.
I am her only legal heir. How can I get the amount in such a case.
I have few constraints, I want you to know those and give a suitable suggestion
1) I have now moved to a new location (work place) (5 hrs by road distance from my home town).
2) I might not be there in India at the time of maturity of KVP and may be back in a year or two.
here are my questions, I would like your opinion on
1) Shall I do a premature withdrawal? What documents would be required in such a case as KVP was in my mother’s name.
2) Or Shall I do it after I am back… May be year or two after maturity?
3) How do they give the money? Is it in the form of an Account Payee cheque?
4) Does post office deduct TDS too?
Regards
Yogesh
Dear Sir,
I hold a KVP (from a post office in my home town)
principal amount 50,000
Maturity amount=1 lac
To be matured in July-2015
It was in my mother’s name and she died few years ago.
I am her only legal heir. How can I get the amount in such a case.
I have few constraints, I want you to know those and give a suitable suggestion
1) I have now moved to a new location (work place) (5 hrs by road distance from my home town).
2) I might not be there in India at the time of maturity of KVP and may be back in a year or two.
here are my questions, I would like your opinion on
1) Shall I do a premature withdrawal? What documents would be required in such a case as KVP was in my mother’s name.
2) Or Shall I do it after I am back… May be year or two after maturity?
3) How do they give the money? Is it in the form of an Account Payee cheque?
4) Does post office deduct TDS too?
Regards
Yogesh
It doesn’t look like it’s gonna be of any good to the ordinary citizens. Then for whom is it being relaunched?
It was popular scheme before it was withdrawn. More for people in rural areas
It doesn’t look like it’s gonna be of any good to the ordinary citizens. Then for whom is it being relaunched?
It was popular scheme before it was withdrawn. More for people in rural areas