Kisan Vikas Patra (KVP) is a savings scheme offered by the Indian government that encourages small savings and investment among farmers and individuals from rural areas. The scheme was first introduced in 1988 and was later re-introduced in 2014 after being discontinued for a few years. KVPs are one of the safest investment options available in India as they are backed by the government and offer a guaranteed return on investment.
In this article, we will provide a comprehensive overview of Kisan Vikas Patra (KVP) and cover topics such as the features and benefits of the scheme, eligibility criteria, how to invest in KVP, tax implications, and more. We will also discuss the recent changes made to the scheme by the government and analyze the pros and cons of investing in KVP.
What is Kisan Vikas Patra (KVP)?:
Kisan Vikas Patra (KVP) is a government-backed savings scheme in India aimed at encouraging small savings and investment among farmers and individuals from rural areas. It offers a guaranteed return on investment and is considered to be one of the safest investment options in India. The scheme was first introduced in 1988 and was later re-introduced in 2014. KVPs can be purchased from post offices and some designated banks and can be held for a fixed tenure of 2.5, 3, or 5 years. The interest rate on KVPs is determined by the government and is subject to change from time to time.
The following individuals can open a Kisan Vikas Patra (KVP) account:
- Individuals above the age of 18 years
- Minor(s) with a guardian who is above the age of 18 years
- Trusts
- Hindu Undivided Families (HUFs)
- Non-Resident Indians (NRIs) are not eligible to invest in KVP
There is no maximum age limit for investing in KVP. However, minors can only invest through their guardians. The guardian should provide proof of identity and address while opening the KVP account for the minor.
Investors can purchase KVP from designated post offices or banks by filling up the KVP application form and providing the necessary documents. The minimum investment amount for KVP is Rs. 1,000, and there is no upper limit on investment.
Procedure for Redemption of the Kisan Vikas Patra:
Redemption of Kisan Vikas Patra (KVP) can be done after the completion of the maturity period, which can be 2.5 years, 3 years, or 5 years, depending on the investor's preference. Here are the steps to redeem KVP:
- Visit the post office or bank where you purchased the KVP.
- Fill in the KVP redemption form, which is available at the post office or bank, and provide your KVP certificate.
- Provide proof of identity and address, such as Aadhaar card, PAN card, passport, or voter ID card.
- The post office or bank will verify the details and process the redemption request.
- The maturity amount will be credited to the investor's bank account or paid through a cheque.
If the investor wishes to redeem the KVP before maturity, they can do so by visiting the post office or bank and submitting a request for premature withdrawal. However, premature withdrawal is subject to certain conditions and penalties, as per the rules set by the government.
Maturity Period and Interest Rate on Kisan Vikas Patra (KVP):
The maturity period for Kisan Vikas Patra (KVP) is 2.5 years, 3 years, or 5 years, depending on the investor's preference. The investment doubles after the maturity period, which means if an investor invests Rs. 10,000 in KVP for 5 years, they will receive Rs. 20,000 after the maturity period.
The interest rate on KVPs is not fixed and is subject to change from time to time. Currently, the interest rate is 6.9% (as of March 2023) compounded annually. However, the interest rate at the time of investment remains the same for the entire tenure of the investment. The interest earned on KVPs is taxable, and tax is deducted at source (TDS) if the interest earned exceeds Rs. 10,000 in a financial year.
Loss of Kisan Vikas Patra (KVP) certificate:
If an investor loses their KVP certificate, they can apply for a duplicate certificate by submitting an application along with an indemnity bond and an affidavit. The investor will also have to pay a fee for issuing a duplicate certificate. The application can be made at the post office or bank where the KVP was purchased. The investor will have to provide their personal details, including the name of the account holder, KVP certificate number, and the date of issue.
Premature closure of KVP:
An investor can withdraw their investment before the maturity period under certain circumstances, such as a medical emergency or a court order. However, premature withdrawal of KVP is subject to penalties and conditions as per the rules set by the government. If an investor wishes to withdraw their investment before the maturity period, they should visit the post office or bank where the KVP was purchased and fill up a request form for premature withdrawal. The amount payable to the investor will be calculated after deducting the applicable penalty charges. The penalty charges for premature withdrawal of KVP are subject to change from time to time as per the government's rules.
Also Read: "SUKANYA SAMRIDDHI ACCOUNT"
Tax on Kisan Vikas Patra:
The interest earned on Kisan Vikas Patra (KVP) is taxable as per the Income Tax Act, 1961. The interest earned on KVP is added to the investor's income and taxed according to their income tax slab rate.
Tax is deducted at source (TDS) if the interest earned on KVP exceeds Rs. 10,000 in a financial year. The current TDS rate is 10%, and it is deducted at the time of maturity or when the investor sells the KVP before maturity. However, if the investor's income falls below the taxable limit, they can submit Form 15G or 15H to the post office or bank to avoid TDS deduction.
It is important to note that the interest earned on KVP is not eligible for any deductions or exemptions under Section 80C or any other section of the Income Tax Act. Therefore, investors should factor in the tax liability while considering KVP as an investment option.
Pros of investing in Kisan Vikas Patra (KVP):
- Guaranteed Returns: KVP offers guaranteed returns on investment, which are fixed at the time of purchase and remain constant until maturity.
- Low Risk: KVP is backed by the Government of India, making it a safe and low-risk investment option.
- Easy to Invest: KVP can be easily purchased from designated post offices or banks, and the investment process is simple and hassle-free.
- Flexible Investment Amount: KVP has a low minimum investment amount of Rs. 1,000, and there is no upper limit on investment.
Cons of investing in Kisan Vikas Patra (KVP):
- Tax Implications: The interest earned on KVP is taxable as per the investor's income tax slab rate, and tax is deducted at source if the interest earned exceeds Rs. 10,000 in a financial year.
- Fixed Maturity Period: KVP has a fixed maturity period, and premature withdrawal can result in penalties and reduced returns.
- Low Liquidity: KVP is not a liquid investment, and premature withdrawal can result in penalties and reduced returns.
- Limited Growth Potential: The interest rate on KVP is subject to change, and the returns may not keep pace with inflation or offer significant growth potential over the long term.
Overall, Kisan Vikas Patra is a suitable investment option for risk-averse investors looking for guaranteed returns with low risk. However, investors should consider the tax implications, fixed maturity period, and limited growth potential before investing in KVP.
Conclusion:
In conclusion, Kisan Vikas Patra (KVP) is a popular investment scheme that offers attractive returns to investors. The scheme is backed by the Government of India and is considered to be a safe investment option. KVP has a fixed maturity period and the interest rate is subject to change from time to time. The interest earned on KVP is taxable and tax is deducted at source if the interest earned exceeds Rs. 10,000 in a financial year. KVP can be purchased from designated post offices or banks, and there is no upper limit on investment. KVP also offers options for premature withdrawal and duplicate certificates in case of loss. Overall, Kisan Vikas Patra is a suitable investment option for investors looking for a safe and secure investment with guaranteed returns.
Thanks for reading... If you enjoyed this article, please like and share for better reach!!
Tags:
Government scheme