What is the Post office Kisan Vikas Patra (KVP) Scheme?

Written By Sushma Singh

Want to find out the features, benefits or interest rates of Kisan Vikas Patra (KVP) Scheme? Then in this guide, we have discussed in detail about who should invest, eligibility, advantages, premature encashment, etc.

For lower and middle-income earners, the Indian government introduced the KVP scheme in 1988. It was discontinued in 2011 but was re-introduced in 2014. India post office issues Kisan Vikas Patra (KVP) in the form of saving certificates. It was and is a very popular investment scheme as it is a risk-free investment guaranteed by the Government of India. Also, the government is liable to pay interest on the investments at a prearranged rate.

What is the Post office Kisan Vikas Patra (KVP) Scheme?

Kisan Vikas Patra doubles your investment in approximately 118 months. These 118 months are around 9 years and 10 months. It can be easily bought from public sector banks or India Post Offices. There is as such no limit on the amount you invest in the KVP. But it is preferred to be in the denominations of Rs. 1000, Rs. 5000, Rs. 10,000, and Rs. 50,000. However, the amount of deposit cannot be less than Rs. 1000.

As the name suggests, it was an investment scheme for farmers. Now, after the 2014 re-launch, it is available for all. But the re-launch in 2014 bought many rules as well. PAN card proof was made obligatory for savings above Rs. 50,000. Income proof like a bank statement, ITR documents, salary slips, etc. are to be shown before investing 10 lakhs or above. This is done to keep a check on money laundering issues.

Apart from the rules, the KVP has become a safer platform to park your money at a minimum risk for a certain period. Before depositing, the investor must submit AADHAR number as an identity proof.

Who can invest?

KVP is opened for all Indian residents who have attained maturity, i.e., who is of the age of 18 or more. A trust organization, which is established in India, is also eligible to invest in this scheme. However, companies, HUFs (Hindu Undivided Family), Non-Resident Indians (NRIs), and other institutes cannot invest in Kisan Vikas Patra.

This scheme is particularly appealing to rural people. Also, a joined account of a minor with an adult’s account can be opened. KVP is very suitable for individuals who avoid taking the risk and have surplus money, which is of no use shortly. Although the Kisan Vikas Patra is a good saving choice, the final decision is dependent on your risk profile and your financial goals.

For instance – Public Provident FundNational Saving Certificates and tax-saving bank FD Schemes are suitable for people who are more of a tax- saver. And Equity Linked Savings Scheme (ELSS) is for people who are open to some level of risks. Therefore, it is significant to invest according to your financial strengths.

Documents required for a KVP account and its procedure

  • You need first to collect the application form (Form-A), duly fill the form, and submit to the PO.
  • In case the investment is made through an agent. The agent needs to fill Form-A1.
  • Forms are available online and can also be downloaded)
  • After this, you need to submit any of your identity proof. This process is known as Know Your Customer (KYC). Anything like your PAN card, AADHAR card, Voter’s ID, Driving License, or Passport can be your identity proof.
  • Once the documents verification is done, you need to make the deposit.
  • You will take the delivery of a KVP certificate after this. The certificate is needed to be kept safe until the time of maturity. (the certificate can also be mailed to the customer on his or her request)
  • A person can avail of the facility of KVP from India’s post offices, state banks, nationalized banks and associate banks of India.
  • The procedure for applying for a KVP is easy; you just need to decide the amount you want to invest. The investment payment can be made in cash, bank transfer, locally executed cheque, or demand drafts.

Also Read: Long term investment vs Short term investment (Difference)

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Key features & reimbursement of Kisan Vikas Patra

  • Guaranteed returns – KVP at all times will give you back the sum certainly. It is and will never be affected by market fluctuations. KVP, which was initially originated for farmers by this, wanted to induce saving for rainy and unfortunate days. Also, the capital you invested will be safe. You will receive the gains when the tenure ends undisturbed.
  • Interest – The interest rate for the Kisan Vikas Patra account holder varies. It is dependent upon the number of years you have invested your money for. It may be changed periodically, as per the announcements of the Finance Minister. The recent rate charged on KVP is 7.6 %. The rate of interest charged on KVP is compounded annually.

Here is a table showing the historical interest rates:

Time Interest Rate of KVP Maturity
Q2 FY 2019–20 7.6% 113 months
Q1 FY 2019–20 7.7% 112 months
Q4 FY 2018-19 7.7% 112 months
Q3 FY 2018-19 7.7% 112 months
Q2 FY 2018-19 7.3% 118 months
Q1 FY 2018-19 7.3% 118 months
  • Tenure – The maximum maturity period of the Kisan Vikas Patra is 118 months. The proceedings of KVP maturity will continue, and interest will be accrued until you withdraw the amount.
  • Taxation – Although the returns are not tax deducted as per 80C deductions, the Tax Deducted at Source (TDS) after maturity is exempted from withdrawals. KVP is a tax chargeable as under “income from other sources.”
  • Loan against Kisan Vikas Patra – The KVP certificate can be easily used as collateral for getting a secured loan. Moreover, the interest rate for the loan against the KVP is lesser in comparison to other securities.

Different types of Kisan Vikas Patra accounts

  1. Single Holder Type Certificate – This certificate is issued to sole individuals for their single investment. Also, under this scheme, you can open a single account of a minor (on his/her behalf).
  2. Joint ‘A’ Type Certificate – This is a joint KVP account holding. This is for two adults jointly holding the KVP account. As a benefit, at the time of maturity, the amount is payable to both the individuals. And in case of recommendations, reallocation, or cancellation of KVP, signatures of both the individuals is required.
  3. Joint ‘B’ Type Certificate – This is similar to ‘A’ type, but the difference is that the KVP investment certificate is issued to both the holders. They both can individually manage the certificate. But at the time of maturity, only one of them is liable to get the KVP amount.

Also Read: How to Apply for MUDRA Loan in India (2020)

KVP premature withdrawal

Under KVP, the investors are allowed to withdraw their funds before the maturity period. However, some limitations are attached to it. They are-

  • If the premature withdrawal is made within 1 year, no interest will be gained by the account holder. Moreover, a penalty is charged as per the regulations.
  • If the premature withdrawal is made after 1 year to 2.5 years, then the interest will be received but at a lower rate.
  • If the premature withdrawal is made after 2.5 years, then there is no such penalty, and the account holder receives the applicable rate of interest.

Transferring of KVP

There are two types of transfers available under KVP. They are:

  • From one post office or bank to another – Occasionally, the account holder may transfer from one place to another. It becomes difficult for him to manage and handle his or her KVP. Therefore, a provision for changing the location of the KVP account from one post office to another or from one bank to another is allowed. The investor just needs to submit a transfer application. The application can be sent to either of the old or new post office or bank.
  • From one person to another – If the current account holder wants to transfer his certificate to another person, he/she can apply for the same. Written consent to the postmaster of the certificate holding post office is sent. Transfer of KVP can be done under the following circumstances:
  1. If the original KVP holder is dead.
  2. If there is an order by the court of law.
  3. In joint type ‘A’ and ‘B’, for transfer of ownership within the holders.

Duplicate KVP

The KVP holder must keep the KVP certificate with him or her safely because if the certificate is lost or damaged, you can apply for a duplicate one. The banks, post offices, after checking, verifying, and validating all your documents proof and applications may provide you with a duplicate copy.

Therefore, Kisan Vikas Patra is safe and can easily match your investment goals. It does not require many documents and has short procedures. If you open a KVP account, you can easily manage it without giving much tension to market fluctuations. All you need is decide how much you wish to invest in the Kisan Vikas Patra scheme and pay a short visit to your nearest post office or bank proving KVP facility.

Moreover, after the 2014 re-launch, many changes in favor of the users have been made. Now, small and medium earners can save their surplus under a safe and long-term investment scheme.

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Sushma is a full-time blogger and financial expert. Join Sushma and 10,000 monthly readers here to learn how to save and invest your money wisely.

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