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Whether you’re a beginner investor or risk-averse, you want an investment avenue that can give assured returns. And if you’ve done your research well, you’ve probably come across the Kisan Vikas Patra scheme.
Launched in 1988 by the Indian Government to inculcate long-term financial discipline among people, the scheme is still immensely popular among investors looking for a low-risk, long-term investment avenue to earn returns. But is this scheme a good one for your investment goals?
This blog delves into the eligibility criteria, features, interest rates and returns the scheme offers to help you make a better decision.
The Kisan Vikas Patra (KVP) is a savings certificate scheme that allows you to invest lump sums for a fixed tenure (approximately 10 years). Once the holding period is complete, they receive about double the investment amount.
Although the scheme was initially started to help farmers get into investing, it is open to all Indian citizens today. In fact, investing in this scheme is as easy as applying along with a copy of the requested documents at the nearest post office or bank and making the payment post the document verification. Now, you will get a KVP certificate, depending on the type of account you choose.
You can open three types of accounts. These include:
Here are the other details of the scheme you should know before investing.
Here are the eligibility requirements for the KVP scheme
You can add as little as Rs. 1000 and begin your KVP scheme. What’s more, there’s no upper limit to the amount you can invest through the scheme. This makes the KVP accessible to people from all walks of life.
Note you can buy KVP certificates in denominations of Rs. 1000, Rs. 5000, Rs. 10,000 and Rs. 50,000. That said, certificates worth Rs. 50000 will only be available at the head post office. Besides, you must furnish your PAN card to receive the certificate.
The interest you earn from the scheme will depend on the time of the purchase. This is because the KVP interest rates are revised quarterly by the Government. The interest rate for the Q1 of 2023 (April 1 2023 to June 30 2023) rests at 7.5%. Furthermore, the interest gets compounded to your principal amount, allowing you to earn better deposit returns.
The Kisan Vikas Patra maturity period is 115 months (9 years and 7 months), after which account holders can withdraw their funds. Note that the funds will continue to earn interest until you withdraw the amount.
Since the KVP does not come under the purview of Section 80C of the Income Tax Act, the returns earned from the scheme are taxable. That said, once you withdraw the funds post-maturity, you won’t have to pay TDS on them.
Remember, the KVP has a lock-in period of 2 years and 6 months or 30 months. You can only redeem funds from the KVP scheme before this lock-in period ends if the account holder passes away.
Unlike other investment avenues, investing in the KVP schemes means you will get assured returns. This is because the returns aren’t subject to market fluctuations. The interest rate is fixed, depends on the rates prevalent at the time of applying and remains constant till the end of the tenure. Plus, given it is a Government-backed scheme, the chances of losses are even lower.
Since the KVP scheme has a lock-in period of 2 years and 6 months, they are more liquid than other investment avenues with longer lock-in periods.
Along with being a fairly liquid investment avenue, the KVP scheme allows you to take out loans using the certificate as collateral. This can help you secure funds quickly in case of a financial emergency. Besides, it will make the loan repayments easier, given it is a secured loan.
Both single and joint holders of a KVP certificate can nominate individuals who will receive the scheme's benefits in case of the account holder's death. This way, they don’t have to worry about how their funds will be utilised post their demise.
All account holders need to do for nomination is fill out Form C. Note that account holders can fill out this form at the purchase time or before the scheme matures.
You invest in the KVP scheme by filling out Form 1 and submitting it at a post office or an eligible bank's branch. You must affix your photo, mention your PAN details and provide KYC proof to this form. These include-
Once you submit the KYC documents, you can fill out Form C to nominate your family member to receive the scheme's benefits post your demise. Next, you need to make the payment. You will receive the certificate once it is ready.
You can encash the KVP certificate once the scheme matures by directly visiting the post office or bank that issued the certificate. You will need to furnish the identity slip you provided while issuing the encashment certificate.
Now that you know the details about the Kisan Vikas Patra scheme, you can decide if you want to invest in the scheme to meet your financial goals.
That said, if you want to invest in other investment avenues offering better returns, you can find a suitable scheme through Tata Capital. We help you choose from a range of investment schemes that align with your financial goals to help you take better control over your future. Visit our website to learn more.
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