Kisan Vikas Patra (KVP) is a long-term saving scheme available in India. This scheme primarily focuses on increasing the savings habit in rural and semi-urban areas. It is one of the oldest and the most popular savings scheme among the Indians. KVP scheme provides better returns. The tenure of Kisan Vikas Patra is about 9 years and 10 months. It accounts for 118 months.
KVP scheme was considered to be the risk-free investment option as it is backed up by the Government Of India. It comes with a fixed rate of interest. At present, the interest rate of the KVP account is 6.9%. This scheme doesn’t have any market-related risks. Through this scheme, mid and low-income people will have financial security for their future.
1) What is the Kisan Vikas Patra (KVP)?
Kisan Vikas Patra is known as one of the oldest savings schemes followed in India. It was introduced at the year 1988 by the India post. As the name indicated this scheme is primarily introduced to protect the financial security of farmers. Only farmers are allowed to invest in this scheme.
Later, Government has announced that all groups of people are allowed to open KVP certificates. The account can be opened either as a single account holder, joint account holder, or on behalf of the minor. In the year 2014, this scheme got reintroduced by the Government of India. This scheme too comes with the tax benefits like other savings account like PPF and NSC.
2) Why do we need to choose Kisan Vikas Patra (KVP)?
The primary reason to choose Kisan Vikas Patra (KVP) is they provide high returns for the principal amount. The minimum amount to be invested in Kisan Vikas Patra is Rs.1000. Even by depositing the minimum amount of Rs.1000 an account holder will accumulate for the long term. This ensures the financial security of the account holder after the tenure of this scheme.
Generally, this scheme works as same as other schemes like Public Provident Fund (PPF), National Service certificate (NSC), Senior Citizens Savings Scheme (SCSS), and Sukanya Samriddhi Yojana Scheme (SSYS). But varies in the point
- Interest rate
- Tenure period
- KVP is applicable to all groups of people while SSYS is limited only to girls and SCSS is limited only to senior citizens
- Fixed Lock in-period
The KVP scheme is easily available as it was enabled all over the post offices around the nation. This scheme can be purchased as a joint certificate. So that in case of the demise of the primary account holder the second holder can able to withdraw the balance. It has the facility of nominating the nominee for the KVP account.
3) What are the eligibility criteria for opening a KVP certificate?
To open a Kisan Vikas Patra (KVP) you should need to meet certain criteria as follows.
- An individual should be of Indian citizen
- The applicant should be above 18 years
- In the case of a minor, they can’t bale to purchase a KVP certificate. But the individuals who are above 18 can able to purchase the KVP certificate on behalf of minors.
- Within the different types of certificates available, KVP can be purchased for minors with his/her name. Also jointly under the name of two individuals
- Some other post office schemes can’t be purchased by the trust. But KVP certificates can be purchased by the trusts
- Like other schemes like PPF and NSC KVP is also not available for Hindu Undivided Family (HUF) and Non-Resident Indians (NRI).
4) What are the different types of Kisan Vikas Patra (KVP) certificates?
Generally, the Kisan Vikas Patra certificates can be classified into three types
- Single holder types certificate
- Joint ‘A’ type certificate
- Joint ‘B’ type certificate
4.1) Single holder type certificate
As the name implies this certificate is for a single KVP certificate holder. No other join certificates are permitted for this type. An individual who opens a KVP certificate on behalf of a minor can claim this certificate.
4.2) Joint ‘A’ type certificate
As the name suggests this type of certificate is applicable only for joint accounts. KVP with a single holder isn’t able to claim this type of certificate. The maturity amount got splits into two for each account holder.
4.3) Joint ‘B’ type certificate
This type of certificate is also applicable only for joint account holders. The difference between join ‘A’ and Join ‘B’ is that the maturity amount will be benefited only for one of the account holders in the case of Joint ‘B’ type.
5) What are the steps to open a Kisan Vikas Patra (KVP) account?
You need to visit the nearby poss office or the eligible bank to apply for the Kisan Vikas Patra. Follow the below-mentioned steps as follows
- The applicant needs to get the application form from the post office and from the permitted bank. Form A is the application form for the KVP certificate
- Fill in the details in the form thoroughly. Then submit the filled form to the KVP certificate provider
- Before submitting the form attach the required documents needed for KYC verification
- After the verification gets completed, you can make deposits to the KVP account
- The deposit can be of cash, cheque, or demand draft which should be drawn in the name of the postmaster
- Finally, if you have made the deposit through cash, then you will receive the KVP certificate immediately. If you made a cheque deposit you will be provided with the receipt. After the verification of the cheque, you can collect your KVP certificate.
5.1) Documents required for opening Kisan Vikas Patra (KVP)
While filling the KVP application form they will insist us to attach some of the documents for KYC verification. Those documents are
- Your recent passport size photographs
- You need to attach your identity proof and your address proof
- For id proof and address proof, you can submit your Aadhaar card, Pan card, Voter identity card, Driving license, and Passport
- For the KVP certificate, you need to provide a Birth certificate also
- Finally thoroughly filled application form
5.2) Fields in Kisan Vikas Patra application form
While filling the application, you need to furnish a lot of information listed below. If you need the application form of KVP follow these steps properly.
- In the name field enter the primary account holder of the KVP certificate
- Enter the amount of which the KVP certificate is going to be purchased
- Then you need to mention whether you are going to choose a single certificate or Joint ‘A’ certificate, or a Joint ‘B’ certificate
- For minors, the date of birth certificate is also needed to be attached and the guardian who can encash the KVP certificate
- While nomination the nominee, their details like name, address, and date of birth should be entered in the form
- Then the form must be duly signed by the primary account holder. Also, the signature of a witness for the nomination will be entered in the form
There will be an identity slip for the KVP certificate. This slip includes the KVP certificate serial number, issue price, remarks, date of encashment, and the signature of the postmaster. If you need to encash the KVP certificate then it is mandatory to submit an identity slip. So that provides the information with perfection.
6) What are the unique benefits of the Kisan Vikas Patra (KVP) scheme?
KVP certificates come with a lot of benefits includes
6.1) Guaranteed returns
KVP certificate scheme is purely a government-backed scheme that doesn’t depend upon market value. So that the returns won’t get affected by market fluctuations. Returns will be based on your fixed rate of interest only.
As this is scheme is to encourage the savings of the farming community, they can able to save the amount for the rainy days.
6.2) Capital protection
In other investment options like mutual funds and in stocks there will be a risk of losing your capital due to the market risk. As the KVP certificate scheme is free from market risk there will be no risk of your capital. It will be returned to it with the earned interest.
6.3) Interest rate
The current interest rate of KVP is about 6.9%. Though the interest rate is somewhat quite less than the other savings scheme like PPF it will quite effective. The KVP certificate interest will be compounded monthly and credited annually.
This will double your principal amount at the end of your tenure. Thus the interest will be accumulated at your KVP scheme to provide better returns.
6.4) Tax Benefits
One of the drawbacks of the KVP certificate scheme is that it doesn’t include any tax benefits. While other schemes like PPF, NSC, SCSS, and SSYA have a tax exemption feature under the 80Cof income tax act. On the other hand, KVP does not has any tax exemption feature.
The return from the KVP certificate savings scheme is completely taxable. While it doesn’t include Tax Deduction at Source (TDS) for the withdrawals after the maturity period.
6.5) Flexibility
The minimum amount of which KVP is to be purchased is Rs.1000. KVP certificate is also available in other denominations like Rs.5000, Rs.10,000, and Rs.50,000. This will be flexible for the low and mid-income people to invest in this scheme.
There is no upper limit for the maximum deposit of the KVP certificate. Also, the denomination of Rs.50,000 is available only in the head post office.
6.8) Loan against KVP certificate
One of the most useful benefits for farmers is getting a loan against the Kisan Vikas Patra’s certificate. With these benefits, farmers can avail loans in their hard times for their crops. Thus KVP certificate is used as collateral.
6.9) Premature withdrawal
Generally, the lock-in period of the KVP certificate comes with 2 years and 6 months. But you can’t have the option to do premature withdrawal before the completion of tenure. But in certain cases, you are allowed to do premature withdrawal. They are
- The unfortunate demise of the primary account holder
- Or in case of any court order.
Only under these circumstances premature withdrawal and closure of account are allowed.
6.10) Encashment of KVP
If you wish to do encashment of KVP certificate, you need to carry this process only at the post office where you have brought the certificate. In case of encashment of KVP in another post office then you need to carry out some formalities.
For encashment, you need to provide a letter along with your identity slip provided at the time of opening the KVP savings scheme certificate.
Hereby concluding that if you are looking for a long-term investment scheme with decent returns and fixed income, then Kisan Vikas Patra (KVP) will be the better option. But if you need tax benefits with fixed interest and a decent return then you can choose PPF instead of a KVP certificate.
7) FAQ
Yes, the Kisan Vikas Patra (KVP) certificate can be transferred from one post office to another as well as from one person to another. For this, you need to write a letter to the concerned post office.
When you lost your Kisan Vikas Patra (KVP) certificate you can apply for a duplicate certificate by writing the letter to the post office. You need to attach the identity slip which will be the proof of your ownership. If you lost your identity slip too contact the post office for further process.
