Indians traditionally would like to make risk free investments even if it comes at reduced interest rate. Kisan Vikas Patra was popular among many rural Indians but was earlier discontinued. This was because the farmers for whom it was intended was not getting benefited.
The reintroduction of Kisan Vikas Patra (KVP) by the Government of India will provide an opportunity for millions of people to invest in long-term savings plan. According to the scheme, the invested amount doubles in eight years and seven months.
Kisan Vikas Patra – KVP
The Small Savings Directorate sells/issues KVP savings certificate across the country through the post offices and nationalized banks. The savings scheme is open for all the citizens of India. The minimum withdrawal period for a savings certificate is 2.5 years from the time of purchase of the certificate. The encashment includes the interest accrued for the stated period.
The KVP certificates are available from nationalized banks, associate banks, state banks and post offices across the country in denominations of Rs. 1,000, Rs. 5,000, Rs. 10,000 and Rs. 50,000. The advantage of the certificate is its ability to transfer from one person to another. It is further possible to transfer from one bank to another of one post office to another.
Furthermore, purchase of the certificate gives complete freedom to the applicant. It means that the applicant can obtain individually, jointly or in the title of a minor. It is also possible to include a nominee in relation to a certificate. These advantages provide a fruitful return for people who seek a well-secured savings plan that protects and returns a good amount at maturity.
The primary aim of reintroducing KVP by the government of India is to utilize the generated revenue for various schemes entitled for the farmers. Every individual is eligible to obtain the Kisan Vikas Patra and save money.
As the certificates are available in different denominations, it is necessary for the applicant to consider the initial investment into the savings scheme. For example, an applicant planning to invest Rs. 1 Lakh can purchase to certificates of Rs. 50,000.
KVP Application Procedure
Kisan Vikas Patra is available across the country and post offices, nationalized banks, state banks and associate banks. An applicant willing to invest in KVP can visit the nearby post office or nationalized bank and fill out the application form.
The deposit for KVP is possible in the form of cash, cheque or demand draft. It is essential to provide complete data in the application form. In the event of minor, it is necessary to mention the current age of the applicant (minor) and the relationship.
Those who intend to include a nominee can also provide the respective details in the form. Upon submitting, the application form along with the photographs, the post office or the bank will issue the certificate called Kisan Vikas Patra. The certificate contains the details of the applicant, the invested amount, date of maturity and the amount received by the applicant on maturity.
A group of people or a trust is also available to open KVP. Two individuals can jointly open a single KVP. Parents or guardians can open the small savings account in the name of a minor. Overall, every citizen of India is eligible to apply for the savings scheme introduced by the Government of India. However, business institutions, organizations, NRIs and HUF (Hindu undivided family) are not eligible to invest in Kisan Vikas Patra.
Applicants submitting the application form with cash or demand draft will receive a certificate on the same day. At the time of issuance, the holder will also receive an additional identity slip.
The identity slip will act as a proof and function efficiently in case of loss of the original certificate. Upon providing, the identity slip, the post office or the bank will issue a duplicate. Furthermore, the slip also helps in encashment of the maturity value at the time of maturity.
How to get KVP duplicate certificate
Most applicants either lose or damage their original certificate. Under such conditions, obtaining a duplicate is possible with the help of the identity slip provided to the applicant at the moment of the application.
The holder can visit the nearby post office or bank and submit an application for issuance of the duplicate. An indemnity bond might be required for getting the duplicate depending on the officer/post office.
However, the approval of the issuance depends on the authority of the post office and after verification of the details submitted by the applicant. To speed up the process, certificate holders can attach the identity slip provided to them during the initial application process.
For damaged KVP certificates, you have to submit the original certificate which will be retained in the post office when giving you the new Kisan Vikas Patra duplicate certificate.
Type of KVP certificates
Kisan Vikas Patra is available in three different types. The availability makes it easy for any individual to apply for the certificate and start their savings account with a guaranteed return. The following are the three categories:
- Single Holder Certificate
According to the certificate, an individual, precisely speaking of a major (over 18 years of age) is eligible to apply for the KVP certificate or act as a guardian to a minor.
- Joint-A Type Certificate
According to the Joint-A type certificate, a single application or the certificate allows two adults to own the partnership. The maturity amount is payable to either the individuals or the nominee listed in the application. It is possible to include a nominee into the KVP.
- Joint-B Type Certificate
According to the Joint-B type certificate, a single application or the certificate allows two adults to open the account jointly. However, the maturity amount is payable to any one of the individual or the nominee listed in the application.
The three different categories offer an excellent choice for people to buy certificates for self or on behalf of a minor. Furthermore, the joint opening option provides the chance to increase the purchasing power by including an additional individual.
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Kisan Vikas Patra interest rate
The rate of interest of the kisan vikas patra differs according to the total number of years the holder opts for at the time of purchase. For example, if the applicant purchases Rs 50,000 certificates, chooses eight years and seven months plan, he/she receives Rs. 1,00,000 as the maturity value. The following is the rough calculation (credit)of the interest rate offered by KVP at different periods. One should note the point that the lock-in period for the savings scheme is two and half years. One can withdraw the amount only after this period.
|Kisan Vikas Patra (KVP) Interest Rate Chart (Min Rs 1000)|
|Year Wise Accrued Incomes||15/1/2000 to 28/2/2001||1/3/2001 to 28/2/2002||1/3/2002 to 28/2/2003||1/3/2003 and after|
|2 Yrs & 6 months||1246||1209||1195||1170.51|
|3 years & 6 months||1407||1327||1305||1267.19|
|4 years & 6 months||1585||1470||1439||1355.9|
|5 years & 6 months||1779||1644||1602||1488.49|
|6 years & 6 months||2000||1857||1800||1649.13|
|7 years & 3 months||2000||—–||——-|
|7 years & 6 months||—-||1781.06|
|7 years & 8 months||2000||—–|
|8 years or more but less than 8 yrs 7 months||—-||1850.93|
|8 years & 7 months||—-||2000|
Encashment of Kisan Vikas Patra certificate
Although KVP offers pre-maturity withdrawal,as per KVP official site, the minimum lock-in period is two and half years. Hence, applicants can withdraw the amount before their actual maturity date.
Under such cases, the holder will receive the entire principal amount and the earned interest until that period. In order to withdraw the amount, the holder has to visit the office that issued the certificate.
The authority will return the full amount upon submitting the identity slip. In some cases, if visiting the branch that issued the certificate is not possible then applicant can visit the local post office and fulfill the formalities to obtain the matured amount.
If the withdrawal of the amount is pre-mature, the applicant receives the principal amount and the interest. However, the interest will be less than the original value.
KVP certificate transfer
KVP provides the chance to transfer the certificate to any other person. People can utilize the opportunity to transfer the certificate under emergencies or according to the need.
In order to transfer the certificate, the holder will have to submit a handwritten consent to the officer at the post office or bank. The acceptance of the transfer depends on the fulfillment of the following conditions:
- The transferee is Indian citizen and eligible to purchase these certificates.
- Transfer in the name of the person under the directions as stated by the court of law.
- Transfer in the name of the survivor in case of death of the applicant.
- Submission of Form B signed by the holder or holders of the certificate.
On death of certificate holder, the nominee can ask for transfer to his name for approval of the designated post officer. Sometimes an attested death certificate copy may be demanded.
You need to provide address and identity proof when KVP transfer request is made. If KVP certificate value is more than Rs 50,000 then PAN of the transferee is also required.
Inclusion of nominee for KVP
It is possible to include the nominee at the time of purchasing KVP certificate. Single individual or joint holders can nominate a person by filling the Form C and submit it along with the KVP certificate application form. The nominee receives the maturity amount in case of death of the holder.
Even if there is no nominee during the purchase of the certificate, the individual or joint holders of the certificate can nominate at any time in between but before the maturity of the certificate.
On the other case, it is not permissible to include a nominee for a certificate held by a minor. In addition, it is possible to cancel the nominee at any time by submitting Form D. The holder or holders can once again nominate another person by submitting Form C.
Click on link to get KVP opening form
Main Features of Kisan Vikas Patra KVP
- KVP certificate is available in different denominations. The lowest is Rs. 100 and reaches to a maximum of Rs. 50,000. As it is a project by the Government of India, the holder receives guaranteed returns on the invested amount. Furthermore, the holder will receive double the invested amount after eight years and seven months.
- There is no limitation to the upper amount, and the holder can buy any amount depending on his/her purchase power.
- Being a project of the government, investors who seek risk free investment will benefit from KVP.
- Although the doubling of the investment amount in eight years and seven months has backing of the government, the changing inflation may effect during the end as it is uncontrollable.
- Kisan Vikas Patra certificate can be used as collateral against several loans. Applicants can utilize or submit the same to obtain a loan from banks.
- KVP is transferable from one person to another. However, the holder will enjoy the benefits. Therefore, it is important for the holder to fulfill the formalities in case of transfer to pass on the benefits to the new holder. It is vital to receive approval from an officer at the post office before transferring the certificate to a new holder.
- Kisan Vikas Patra has a lock-in period of two and half years. Withdrawing the amount is possible only after the lock-in period. In the case of pre-mature withdrawal, the holder gets the principal amount with an interest. However, the interest earned is less than the actual value.
- KVP enjoys wealth tax benefit. However, the income from the KVP is taxable. The holder has to furnish the details of the same while preparing their Income Tax. There is no tax deduction on the entire amount received by the holder at the maturity, i.e. no tax deduction at source (TDS).
Kisan Vikas Patra has a prominent importance in terms of small savings for the low and middle income groups. It offers double the investment in eight years and seven months.
In addition, one can even withdraw the amount before the actual maturity date and after the lock-in period of two and half years.
Loan on Kisan Vikas Patra KVP
It is possible to get a loan on Kisan Vikas Patra (KVP). To do that one must possess KVP in his/her own name.
The maximum loan amount depends on the bank through which you apply and also how many years have passed after the KVP certificate was issued.
The maximum tenure period is from the date of taking loan to 1 month before KVP matures. Usually banks ask/adjust the last payment date before that. Usually
MInimum loan amount on KVP – Rs 10,000 and no limit on maximum loan amount( based on KVP value). Generally if you completed 3 years or more bank lend 100% of face value of KVP certificate.
For eg., you purchased KVP for Rs 50,000 in 2012. Then in 2016 usually most banks or Post offices provide close to 90-100% of the value of this Rs 50,000 as KVP loan.
The rate of interest for KVP loan is usually Base rate +4%. This will usually work out more than the interest rate you earn from KVP itself.
Tax implications of Kisan Vikas Patra
If KVP is not withdrawn after maturity , interest will be paid but at savings rate and not 8.7%.
KVP does not enjoy deductions under 80C. Interest on income tax is not exempted and is taxable per income tax slab rates.
It enjoys wealth tax benefit. Although there is no deduction of tax at source, the holder has to furnish the details at the period of filing the Income Tax Returns.
Backed by the government, the KVP is a safe investment scheme for people who seek a secure and good return investment plan. For some NSC is also equally attractive if not more considering the current FY 2015-16 interest rate for KVP is 8.7% without tax advantages.
So what is your opinion of the Kisan Vikas Patra KVP? Is it a good or bad option?