Kisan Vikas Patra (KVP): Government Savings Scheme in India (2024)

FAQs

Kisan Vikas Patra (KVP): Government Savings Scheme in India? ›

Kisan Vikas Patra (किसान विकास पत्र) is a government-backed flexible investment instrument offered in the form of certificates. KVP is a fixed-rate small savings scheme designed to double your investment after a predetermined period of time (115 months in the currently available issue).

As a government-backed savings scheme, KVP guarantees a profitable return on investment over a long-term period. This means that after completion of the tenure of the scheme, a guaranteed maturity benefit is offered to the account holder as accumulated funds.

While individuals can withdraw their KVP certificate at any time according to their convenience, Kisan Vikas Patra premature withdrawals are subject to additional penalties based on the time period after which it is withdrawn from the date of issue.

Tax on Earned Interest

There is no point in accumulating interest if you simply pay it on taxes. An interest earned under PPF is not taxable, meaning you get to keep the entire amount to yourself. In contrast, interest earned under KVP is considered income from other sources, thus making it liable to taxes.

Deposits made into KVP accounts currently earn an interest rate of 7.5% annually compounded. To double your money under this savings plan, at the current interest rate, you will need in 115 months (9 years & 7 months).

The National Savings Certificate is the right choice for you if you are willing to lock your funds for 5 years, and also want to save some taxes. The Kisan Vikas Patra might be a better choice for you if you want higher liquidity, as you can withdraw your funds after 2.5 years of opening the account.

KVP is a risk-free investment option offered by the Indian post office, which is a preferred choice for many people in the country. It is a good option for those looking for long-term investment.

Premature withdrawals made after a period of 1 year and up to 2.5 years will receive interest but at a reduced rate. Premature withdrawal after a period of 2.5 years will not attract any penalties and will also receive interest at the applicable rate.

The Interest Rate on Kisan Vikas Patra is only 6.9% (from 1st Jan 2021 onwards). The Best performing large-cap and Hybrid-equity schemes of mutual funds in 10 yrs have given 15.52%, 14.63 respectively and worst-performing have given 7.70 %, 7.03 of return respectively, as of 9th March 2021.

Why is PPF not a good investment? ›

While PPF investments come with substantial benefits, their limited liquidity can be a disadvantage, particularly during significant market downturns. During a significant market downturn, your asset allocation may become heavily weighted towards debt.

One such promising avenue for investment is the Sovereign Gold Bonds (SGBs) offered by the Reserve Bank of India (RBI). Investing in SGBs provides a hedge against inflation, unlike PPFs or FDs, which have been hit by inflation over the years.

Tenure: PPF has a minimum tenure of 15 years. LIC policies have a flexible tenure, which can be chosen by the customer. Returns: LIC policy offers lower returns of about 4 to 6 per cent. On the other hand, the PPF interest rate is 7.1 per cent annually right now.

This scheme does not have any upper limit on the investment amount. The ideal maturity tenure of the KVP is 124 months. However, premature withdrawals or encashment are allowed under specified circ*mstances.

The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years.

What is the interest rate payable and periodicity of POMIS? For the January to March 2024 quarter, the POMIS interest rate has been set at 7.4% per annum payable monthly. Interest shall be payable on completion of a month from the date of opening and so on till maturity.