What is Kisan Vikas Patra (KVP)?

There are nine government-sponsored post office saving schemes, and Kisan Vikas Patra is one of them. Get to know everything about KVP and benefits attached to it.

Post office savings schemes have been popular among Indians for their low risk and simple investment terms. The post office offers a list of products that provides risk-free and reliable returns on investment. These saving schemes are associated with central government and are operated via 1.54 lakh post offices all over the country.

Kisan Vikas Patra is one of the saving schemes offered by post offices in India. It is a small saving scheme certificate introduced in the year 1988, but was discontinued in the year 2011. However, with improvisation and a few amendments, the scheme was reintroduced in the year 2014, to encourage long-term investment. KVP was primarily introduced for farmers to help them save for long-term, but now, the scheme is open for all. Kisan Vikas Patra is an ideal saving scheme for those who are looking to invest their money with a reliable source.

It is a low-risk saving instrument where you can easily park your money without the risk of losing it. The scheme comes with a lock-in period of 2 years and six months. You can withdraw your money once the lock-in period is over.

The following are the eligibility criteria to avail KVP.

• The applicant must be above 18 years of age and a resident of India.
• The applicant can invest in KVP in their own name or on behalf of a minor.
• Trusts are also eligible to invest in KVP. However, HUFs (Hindu Undivided families) and NRIs are restricted to invest in Kisan Vikas Patra scheme offered by the post office.

KVP is run as per the norms of Indian government and offers guaranteed returns. Some of the key features of KVP are:

• Kisan Vikas Patra is currently available in with a minimum investment amount of Rs. 1000 and in multiplies of Rs. 1000 thereafter.
• There is a maximum limit on investment under KVP.
• The scheme is available at post offices across the nation.
• The scheme comes with a lock-in period of 2 years and six months.
• The maturity value is printed on the KVP certificate. However, the changes can be made based on the changes in the interest rates by the Ministry of Finance.
• Kisan Vikas Patra is transferrable in nature. The certificate can be transferred from one post office to another.
• The current interest rate effective from 01.07.2019 is 7.6%, compounded annually.
• Amount invested doubles in 113 months (9 years & 5 months) as per the prevailing interest rate.

Following are the benefits of Kisan Vikas Patra saving scheme.

• Offers long-term savings: You can invest as low as Rs. 1000 in the scheme, and there is no upper limit for the investment amount. The amount invested is believed to get doubled in 113 months, i.e. 9 years and 5 months. It is one of the safest and best saving schemes which enables you to grow your money double in the long run with no risk involved.
• Investment security: The KVP scheme is one of the most trusted ways to park your money. Since it is a government-owned saving scheme, the returns are secured and guaranteed. The amount that you are going to receive on maturity is declared on the certificate.
• Tax benefits: The investment made under this scheme does not fall under Section 80C exemptions. However, the TDS is exempted from withdrawals made after the completion of the investment term. The tax on accrued interest is due every year. The scheme is exempted from Wealth tax.
• A fixed-rate of Interest: The interest rate of Kisan Vikas Patra small saving scheme is fixed and decided by the Ministry of Finance every quarter. The interest rate remains fixed on the amount that you are investing in. The interest rate offered ensures the doubling of the principal invested in 113 months.
• Fixed lock-in period: The scheme comes with a lock-in period of 2 years and 6 months. You have an option to withdraw your investment prematurely, but only after completion of the lock-in period.
• The physical instrument of investment: Kisan Vikas Patra comes in the form of a passbook booklet that you need to keep safe in a physical form. There is no demat form for this KVP certificate, and it cannot be traded in the secondary market. However, it can be used as collateral against a loan.
• Non-transferable: Only the certificate holder can avail the benefits offered by the KVP scheme. However, with the permission of the post office, and with a few formalities, the certificate can be transferred to another person. Moreover, you can transfer this certificate from one post office to another, within the country.

Yes, you can avail loan against the Kisan Vikas Patra scheme, if you fulfil the following criteria:

• The investment in KVP must be made in the name of the loan applicant.
• The loan can be availed against KVP if it is granted for business or personal purpose.
• The interest rate against such loan may differ from one bank to another. Some banks may even charge a processing fee for such loans.
• The repayment term of the loan should not exceed the duration of Kisan Vikas Patra scheme.
• The loan amount will be decided by the lender based on your investment amount and maturity value.

In case you have lost or destroyed your KVP investment booklet, you have an option to get a duplicate booklet from the post office. There is no other way to claim the investment under KVP, except for holding this booklet.

Despite a few challenges, KVP is all set to rock the financial market as the Indian financial market has a good appetite for traditional small saving schemes. It is beneficial for people in lower-income tax slab who would like to hedge the risk against falling interest rates of fixed-income investments.

KVP seems to be a beneficial option as we are slowly entering the low-interest regime. At the same time, it is crucial to check if it makes sense to invest or not. Because in personal finance space, every product is designed keeping a specific segment in mind, and one shoe doesn't fit all.

Recommended Read: Five Investment Options Other Than PPF That Offer Attractive Fixed Returns