Kisan Vikas Patra (KVP) is a small savings instrument introduced by the Government of India that intends to motivate long-term investments among the public. The scheme was introduced in 1988 and has been revised several times since its introduction. Branded for its simplicity, assured returns, and free access, KVP continues to be popular among risk-averse investors searching for safe paths for the collection of wealth. The article covers the features, benefits and other details of Kisan Vikas Patra.
Overview of Kisan Vikas Patra
In the fixed-income savings scheme, investors can double their principal amount in a specific period of time. The government can later change this maturity period (also known as the maturity period) based on the existing economic scenario and interest rates.
Since the scheme is available at all designated post offices and select public sector banks, it may also reach rural areas. It is aimed at people looking for an investment product with guaranteed returns and low risk. On 30 November 2014, the government relaunched the Kisan Vikas Patra (KVP).
Key Features of Kisan Vikas Patra
Eligibility
- Kisan Vikas Patra can be invested by any Indian citizen above 18.
- A KVP certificate can also be issued in the name of a minor, but a guardian will manage the investment.
- KVP cannot be purchased by NRIs (Non-Resident Indians).
Minimum and Maximum Investment:
- The lowest investment is Rs 1000.
- There is no upper limit; investors can invest to their capacity.
Tenure and Interest Rate:
- The investment duration is based on the government’s fixed interest rate, which can be reviewed occasionally.
- As of now (as of the latest update), an interest rate of 7.5% p.a.; a maturity period of 115 months (9 years 7 months).
Guaranteed Returns:
- It offers guaranteed returns, making it an ideal option for conservative investors.
- At maturity, the investment doubles, allowing for predictable growth.
Transferability:
- KVP Kisan Vikas Patra Kisan Vikas Patra (KVP) certificates can be transferred from one individual to another if both of you are eligible to hold them.
- Transfers could also help gift or inheritance cases.
Premature Withdrawal:
- You can withdraw the amount before the maturity date, but it can only be done after a lock-in period of 2.5 years.
- Withdrawing before maturity can lead to penalties or loss of interest benefits.
Nomination Facility:
- At the time of purchase, investors may nominate a beneficiary who will receive proceeds in the unfortunate event of the investor’s death.
Benefits of Investing in KVP
Safety and Security:
- Kisan Vikas Patra is a risk-free investment with 0% default risk because the Government of India backs it.
A Straightforward and No-Hassle Process:
- The application is simple, with slightly less paperwork. KVP certificates can be obtained from post offices or designated banks.
Ability to Invest in Smaller Increments:
- KVP caters to both small and large investors, as there is no cap on the investment.
Transferable:
- The transferability of certificates improves liquidity and helps manage assets.
Encourages Saving Habit:
- It helps to develop a long-term saving practice that inculcates financial discipline in the people.
Accessibility:
- KVP is available at post offices in every part of the country, which means people living in remote areas can invest in the scheme.
Drawbacks of Kisan Vikas Patra
Taxability:
- While KVP is tax-free, its returns cannot escape income tax, which can impact investors’ net gains.
- KVP investments, however, are not eligible for tax deductions under Section 80C of the Income Tax Act.
Long Tenure:
- Its long maturity time frame makes it less desirable to those looking for short-time frame investments.
Inflation Impact:
- It guarantees a certain interest rate, but sometimes, it may not be high enough to beat inflation, eroding the actual value of investments.
Not Very Accessible for NRIs:
- The scheme is unavailable to NRIs, limiting its audience to resident Indians.
How to Invest In Kisan Vikas Patra
The process of investing in KVP is simple and involves the following steps:
1) Go to the Nearest Post Office or bank:
- Certificates of KVP are available for purchase at any authorised post office or public sector bank designated for KVP.
2) Fill out the Application Form:
- Fill out the KVP application form with all the required personal and investment information.
3) Provide Supporting Documents:
- Provide the necessary Know Your Customer (KYC) documents, which may include:
- Identity Proof (Aadhaar Card, PAN Card, Passport, etc.)
- Proof of Address (e.g., Utility Bills, Voter ID)
4) Make the Payment:
- This initial investment amount is payable through funds, bank cheque or electronic funds transfer.
5) Receive the Certificate:
- Once the payment is made, investors receive a KVP certificate (physical or electronic) confirming the KVP purchase and investment.
Recent Updates and Amendments
The government of India reviews the tenure of Kisan Vikas Patra from time to time based on the country’s economic conditions and revises it accordingly. Here are some recent developments:
Interest Rate Adjustments:
- The Ministry of Finance updates interest rates quarterly to keep them competitive relative to other fixed-income instruments.
Implementation of Digital Certificates:
- Investors can go for e-certificates, which are more secure and convenient than physical ones, to promote digitisation.
Expanded Awareness Campaigns:
- The government has initiated various campaigns to promote KVP among the rural population using the post-office network to achieve this.
Comparison with Other Savings Schemes
Kisan Vikas Patra has its benefits. However, you should compare it with other popular saving schemes to see if it’s the right one:
Public Provident Fund (PPF):
- Provides tax-exempt returns, but it carries a longer 15-year lock-in period.
- Ideal for investors looking for both long-term capital gains and tax advantages.
National Savings Certificate (NSC):
- It is like KVP, though it offers tax benefits under section 80C.
- Has a shorter term of 5 years; it’s ideal for medium-term goals.
Fixed Deposits (FD):
- Flexible tenures yet might get lower interest rates than KVP.
- Interest earned is taxable, just like in KVP.
Post Office Monthly Income Scheme (POMIS):
- Aims to provide regular monthly income, unlike a lump-sum payout upon maturity in the case of KVP.
Who Should Invest in Kisan Vikas Patra?
Kisan Vikas Patra is a great choice for:
Conservative Investors:
- People looking for Safe & Secure returns rather than Risky & High-return investments.
Long-Term Planners:
- Investors who are seeking a fixed-term doubling of their investment without constant monitoring
Rural & Semi-urban Inhabitants:
- Individuals in regions with low access to complex financial products
Parents and Guardians:
- Best for pooling money for a child’s future requirements, like education or marriage.
Conclusion
Kisan Vikas Patra has not lost the trust pageant for people who demand security, simplicity and fixed returns. Though devoid of tax benefits or inflation-beating returns, its guaranteed feature of doubling investments over a fixed tenure makes it an ideal choice for masochistic savers. Individuals can use KVP to benefit and achieve their long-term goals only after prudently evaluating their financial goals, risk appetite, and investment horizon. Managing risk and diversification across your portfolio is a sound investing strategy.
