There was a time when the National Savings Certificate (NSC) and KVP (Kisan Vikas Patra) were considered excellent savings-cum-investment instruments. The crucial aspects that attracted investors to these instruments were that they doubled your investment in six years. However, the interest rates have decreased a lot since the earlier days. So today, an investment of Rs 5000 in a KVP will take approximately 124 months to double to Rs 10000. This article explores various aspects of the KVP.
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What is KVP (Kisan Vikas Patra)?
The KVP can be opened at all post offices of the Indian Post. The Indian Government introduced this small savings scheme in 1988 through the post offices to encourage people to invest long-term and develop financial discipline.
The salient features of KVP
- Investment – The minimum amount invested in KVP is Rs 1,000. There is no upper ceiling on the investments. The KVP is available in varying denominations of Rs 1,000, Rs 5,000, Rs 10,000, and Rs 50,000.
- Interest Rate – The current interest rate on KVP is 6.9% per annum.
- Nature of A/c – The KVP is a low-risk savings platform because the Indian Government guarantees the return. Therefore, the KVP is immune to market-linked risks.
- Tenure – Today, the tenure is 124 months. The objective is to double your investment.
- Tax Concessions – No tax concessions are available on the KVP. The returns are taxable, but the withdrawals after maturity are exempt from TDS.
- Premature withdrawal – The KVP comes with a lock-in period of 30 months. It does not allow premature withdrawal unless against a court order or on the account holder’s demise.
- Nomination – The account holder can appoint a nominee for the account.
- Loans – Banks sanction loans against KVP at low-interest rates.
- Transferability – The KVP is transferable from one post office to another.
- Transferability between account holders is allowed under the following circumstances.
- Deceased account holder to the legal heir
- As per court orders
- Single holder to joint holders
- Joint holders to any one of the joint holders
- Single/joint account holders to another person
Who can open a KVP?
Any individual Indian resident above 18 years can open a KVP. Joint accounts with other adults or minors are also allowed. A trust can invest in a KVP, but an NRI or HUF cannot.
The KVP is a low-risk savings instrument that does not offer tax concessions. So, if you are looking to save on your tax liabilities, you can invest in PPF, NSCs, tax savings FD, etc.
Different Types of KVP
The KVP (Kisan Vikas Patra) is available in three categories.
- Single Holder – Issued to individuals, including minors
- Joint A-Type – Issued jointly and payable to two adults jointly or to the survivor
- Joint B-Type – Issued jointly and payable to either or survivor
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Benefits of investing in KVP
- The KVP is a low-risk-low-gain savings instrument. The Indian Government guarantees the repayment.
- The KVP is an ideal investment vehicle for rural people who do not have access to bank accounts.
- The KVP is a better savings instrument than a bank FD, but it is not liquid. However, the returns are better.
- The deposits go towards national development. In addition, the KVP deposits are utilized to benefit the farming community.
Why has the KVP become less popular today?
Today, the investor has better and more liquid options for saving money. Therefore, investors look for multi-faceted benefits like tax savings on their investments. Unfortunately, the KVP does not offer tax concessions.
Today, banks have reached every corner of the country. Moreover, people have access to the internet and mobile banking services. Under such circumstances, the KVP has fallen out of favor because these instruments are not available online.
The younger generation usually searches for Paise Kamane Ka Best App on the internet. They look for features like ‘Aisa Kya Kare Jisse Paisa Aaye’ or ‘Paise Udhar Chahiye’ on the internet. The KVP does not offer online services like ‘Refer and Earn,’ etc.
These factors are responsible for the KVP losing its popularity to other savings-cum-investment opportunities. Today, loans are available on mobile apps. Hence, no one has the time or the inclination to pledge their KVPs and avail of loans from banks. The overall Indian mentality is changing from a savings mentality to a credit mentality. Under such circumstances, the KVP falls short because it is still an old-fashioned savings instrument.
However, one should admit that the KVP is a risk-free investment, and finding risk-free assets in today’s world is a challenging task. So, the scheme still has admirers that keep it going, even though the returns dwindle.
The Kisan Vikas Patra is a small savings scheme through the post offices to encourage people to invest long-term and develop financial discipline. The minimum amount invested in Kisan Vikas Patra is Rs 1,000. There is no upper ceiling on the investments.
The benefits of investing in KVP are that regardless of the market fluctuations, you will get the sum guaranteed. Secondly, you can use your KVP certificate as collateral or security to avail secured loans. The interest rate is comparatively lesser for such loans. Third, the amount withdrawn after maturity is exempted from Tax.
If you invest in KVP you get an annual interest of about 6.9%. However if you invest in a chit fund it is much more profitable. All Registered Chit funds including the Money Club chit fund platform are known to earn 8-12% returns. Besides, you can also get a lump sum amount in case of an emergency which you can repay through monthly contributions till the end of the chit which is not possible in KVP. To know more about chit funds click on https://moneyclubber.com/ chit fund