Kisan Vikas Patra (KVP) is a savings scheme in India that was launched by the Indian government to encourage long-term savings among farmers. It was launched in 1988 as a small saving certificate scheme for farmers, but today, anybody who fulfil its eligibility criteria can invest in it.
It doubles a one-time investment in a period of approximately 9.5 years (115 months). For instance, a Kisan Vikas Patra for Rs.5,000 will get you a corpus of Rs.10,000 post-maturity.
The scheme is aimed at providing financial security to farmers and small investors. Kisan Vikas Patra is currently offered by the India Post and is available at post offices across the country.
India Post introduced the Kisan Vikas Patra as a small saving certificate scheme in 1988. Its primary objective is to encourage long-term financial discipline in people. As per the latest update, the tenure for the scheme is now 115 months (9 years and 5 months).
There are three types of KVS certificates: Single Holder Type Certificate, Joint ‘A’ Type Certificate, and Joint ‘B’ Type Certificate.
Key features of Kisan Vikas Patra:
Investment Period: KVP has a fixed maturity period, and the investment doubles after the completion of the maturity period. The maturity period for Kisan Vikas Patra is currently set at 115 months (9 years and 5 months).
Guaranteed returns: Regardless of the market fluctuations, you will get the sum guaranteed. As this scheme was originally intended for the farming community, the priority was to encourage them to save for rainy days.
Interest Rate: The interest rates on KVP are announced by the government and are subject to change. The interest is compounded annually. The current interest rate is 7.5% p.a.
Denominations: Kisan Vikas Patra is available in denominations of Rs. 1,000, Rs. 5,000, Rs. 10,000, and Rs. 50,000. To prevent the possibility of money laundering, the government in 2014 made PAN card proof compulsory for investments above Rs.50,000..
Transferability: KVP can be transferred from one person to another and from one post office to another. This feature provides flexibility to investors.
Nomination Facility: Investors can nominate a person who will receive the maturity amount in case of the investor's death.
Premature Withdrawal: Though the account matures after 115 months, the lock-in period is 30 months (2 years and six months). Encashing the scheme early is not allowed, unless in the account holder’s demise or court order.
Tax Implications: Kisan Vikas Patra does not offer any tax benefits. The interest earned is taxable, and the investor needs to declare it while filing income tax returns.
Eligibility: The applicant has to be an adult resident of India. A parent/guardian may invest on behalf of a minor or person of unsound mind. Hindu Undivided Families (HUFs) and Non-Resident Indians (NRIs) cannot invest in Kisan Vikas Patra.
Kisan Vikas Patra scheme is one of those saving avenues that help individuals accumulate wealth over time without harbouring a fear of any associated risk. Currently, it is one of the most popular savings schemes launched by the government of India that operates to mobilise savings and inculcate a healthy investment habit among individuals.
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