Kisan Vikas Patra Yojna (KVPY) 2014

Kisan Vikas Patra Yojna has been relaunched by Government of India on 18th November,2014. The Kisan Vikas Patra scheme was originally launched in April, 1988 but was discontinued in 2011. This was a very popular financial product among the lower and middle income group. 

Main Features of Kisan Vikas Patra are:

• Safe investment scheme  for small income group.
• The scheme will give you annual return of 8.67 %. Interest is compounded annually.
• Your investment will be doubled in 100 months or in 8 years 4 months.
• You can purchase this scheme from a post office. Soon this will be made available in Nationalized Banks too.
• The re-launched KVP will be available in the denomination of Rs 1,000, 5,000, 10,000 and 50,000, without an upper ceiling on investment.
• KVP certificates can be bought in single or joint names.
• You can pledge KVP certificates as security to avail loans from banks
• Only individuals can invest in KVP. You can invest on behalf of a minor too. But Companies, NRIs, HUFs etc., can not buy these certificates.
• Nomination facility is available on KVP.
• You can transfer kisan vikas patra certificates from one post office to another one, anywhere in India
• There is a lock-in period of 2 years and 6 months. After 2.5 years and thereafter in any block of six months  you can encash the certificates. Redemption will be at pre-determined maturity values
• Interest on KVP will be taxed at 10% TDS ( if you are in different income tax slab then you have to club to your income and file Income tax returns accordingly)
• KYC (Know Your Customer) rules are applicable on your KVP investments. You have to submit required documents while investing in KVP.

Premature Encashment of KVP & Amount Payable

Premature Encashment or withdrawal of KVP certificates will be at pre-determined maturity values as below.To invest or not to invest in Kisan Vikas Patra? (KVP vs Bank Fixed Depostis)

• The current  interest rates on bank fixed deposits for 8 year term are around 8.5% (around 9% for senior citizens). We can soon expect reduction in interest rates by RBI in the coming quarters. Even if RBI reduces interest rates, the expected annual yield on Kisan Vikas patra which is 8.67%  is not a great return on investment. (You may like visiting my post on “information on RBI rates.”)
• Also, investments in KVP are not eligible for any tax benefits under Section 80c. If you really want to invest in a safe investment avenue then you can book a 5 year Bank Fixed deposits and get tax benefits too.
• KVP does not have tax benefits and Lock-in period is applicable.
• Consider investing in Public Provident Fund (15 years lock-in will be there) if safety is your priority.
• You can consider investing in National Savings Certificate (NSC – 5 years) which is available at 8.5% interest rate. Also, it has tax benefits too (under section 80c)

Do not just buy Kisan Vikas Patra as it is a safe investment option and promoted by the Government. Before buying KVP certificates, identify your investment requirements first and then compare KVP scheme with other similar investment avenues like Bank fixed deposits, Post office NSC/PPF etc., (I will try to update this post with more details ..Cheers!)