Offered by the Government of India, Kisan Vikas Patra (KVP) is a savings scheme available in post offices across India. Investment in the scheme follows the issue of a KVP certificate in the investor’s name. The savings scheme brings substantial returns on the invested amount on the completion of its maturity period via high interest rate. It is a risk-free investment option introduced by the government to encourage Indians for long-term savings.
While high KVP interest rate ensures the return generated is sizable, these are also low-risk investment options which make them popular among Indians. Initially launched by India Post in 1988, this scheme had been revised in the year 2014. Primarily targeted towards semi-urban and rural investors of the country, this scheme is also suitable for urban residents with average to low income.
KVP plans are available in 3 types which an investor can opt for. While the KVP interest rate remains the same for these types of investments, the variations are based on the number of individuals who can invest in a policy.
- Single-holder: These are issued to a single investor or for an adult who is applying or for a minor.
- Joint A: These certificates are issued to two investors parking their funds in the scheme jointly. Interest earned is also payable to both the investors.
- Joint B: Last of the types of KVP, these certificates can be obtained by two investors jointly too, though the interest is payable to only one individual.
KVP Interest Rates:
The Finance Ministry of India decides the Kisan Vikas Patra interest rate which can vary over different quarters in a financial year. Once an individual invests his/her savings in a specific quarter, the prevailing interest rate is applicable for the whole term.
Consequently, the applicable KVP interest rate also affects the maturity tenure for the investment in a specific quarter. The prevailing interest rate on investments in KVP stands at 7.6%. Resultantly, these policies have a maturity period of 113 months.
While it is crucial to know the Kisan Vikas Patra interest rate 2020 along with its investment tenure, it is also essential for investors to understand where they can apply for these certificates. Investors can apply for these investment instruments at a select few financial institutions along with all the post offices.
The KVP interest rate chart for the last few quarters is illustrated in the table below, along with the change in tenures.
|2nd quarter Financial Year 2019-20||7.6%||113 months|
|1st quarter Financial Year 2019-20||7.7%||112 months|
|4th quarter Financial Year 2018-19||7.7%||112 months|
|3rd quarter Financial Year 2018-19||7.7%||112 months|
|2nd quarter Financial Year 2018-19||7.3%||118 months|
|1st quarter Financial Year 2018-19||7.3%||118 months|
Interest Applicability on Premature Withdrawal of KVP
Premature withdrawal of investments made in KVP is not allowed within 30 months of investment. Beyond that period, premature withdrawal is only allowed if the owner passes away or there is a directive from any court of law. Under such circumstances, there is no depreciation in the KVP interest rates.
Benefits of KVP
While the KVP current interest rate makes it an interesting option for investment, individuals need to understand the numerous benefits which come with this policy.
- Flexibility in investment amount: The certificates which are offered by post offices have values of Rs. 1,000, Rs. 5,000, Rs. 10,000 and Rs. 50,000. With no upper limit to the total investment amount for this scheme, investors can earn returns at the high KVP interest rates for any sum of money invested through a combination of available certificates.
- Easy application: Application procedure for KVP certificates is quite easy. Explained in detail later, investors can apply for KVPs with any post office or authorised financial institution. The application forms are readily available online too.
- Ease of premature withdrawal: After a minimum tenure of 2 years and 6 months has been completed from the date of investment, premature withdrawal is allowed under this investment scheme without any penalty charges.
- Fixed return: Return on this investment scheme is guaranteed under government regulations. Even if the Finance Ministry changes the prevailing rate of interest on KVP certificates, investors enjoy the benefit of assured returns. Under such circumstances, the tenure might change, depending on the increase or decrease in Kisan Vikas Patra interest rate.
- Ease of transfer: A major advantage of investing in these certificates is that they can be transferred easily. It is applicable for both, transfer from one post office to another, as well as transfer from one owner to another.
- Loan options: Investors can use KVP certificates as collateral while availing loans form specific financial institutions. With these certificates serving as collateral, secured loans are available at affordable interest rates due to reduced risks to the lender.
- Tax features: While KVP interest rate offers substantial returns, the Government of India does not provide any tax benefit on these investments under section 80C of Income Tax Act. However, the interest is not subject to TDS (Tax Deduction at Source).
Another benefit of investing in these certificates is that if the money is not withdrawn after the completion of tenure maturity, post offices offer additional interest on the existing corpus. Though this interest rate is not as high as KVP interest rates, it is the same as that of savings account at the post office.
Eligibility Criteria and Document Requirements for KVP
The eligibility criteria which are vital to be able to invest in KVP are –
- Applicants should be a residing citizen of India.
- He/she should be at least 18 years of age.
However, NRIs, PIOs, and OCIs are not eligible to invest in this scheme. Additionally, Hindu Undivided Families (HUF) cannot avail the benefits of this scheme either.
The documents necessary to purchase Kisan Vikas Patra and avail the benefits of KVP current interest rate are listed below in detail.
- KYC documents for identity and address proof. It includes any among Aadhaar card, voter ID card, passport, driving licence, etc.
- Passport-sized photograph.
- Fully filled-in application form for KVP. It can be collected from a post office or downloaded from the official website of India Post.
- Birth Certificate.
Application Process for KVP
The application procedure for KVP investment is quite easy. Once an investor has checked the KVP interest rate chart and decided on investing in this account, the steps mentioned below should be followed.
- The form for KVP should be collected and filled in correctly.
- The different documents mentioned above should also be submitted along with the form.
- After submission of all forms and documents, payment of the amount to be invested should be completed too.
- Once payment is complete, post offices or the concerned financial institution immediately issue the certificates. In case they do not have a sufficient number of certificates, a receipt is issued instead, which can be exchanged later for the KVP certificates.
Applying for KVP certificates with authorised financial institutions also requires you to follow a similar procedure.
The investment is applicable from the day of payment and investors must keep their KVP certificates safe. This certificate is necessary to withdraw the total amount at the time of maturity.
Who Should Consider Investing in KVP?
Designed specifically for the semi-urban and rural population of India, any investor who has disposable money, with a minimum of Rs. 1,000 for a post office, can invest in this scheme. The KVP interest rates which are offered by the Finance Ministry are quite high, and the return is assured. This makes it a good savings option for any individual who does not prefer to invest in instruments exposed to market risks.
Consequently, it can also be a good investment scheme for the urban population, especially for low-income groups who do want hassle-free investment procedure. Kisan Vikas Patra interest rate 2020 offers to double the investment within 113 months, making it a safe savings option.
- Can I encash my KVP from a different post office?
No, you cannot encash your KVP from a different post office branch than the one KVP was issued at.
- Can I invest in KVP certificates online?
No, you cannot apply for investment in KVP certificates online.
- How can I get a duplicate KVP certificate if I lose the original one?
You must apply for duplicate KVP certificates at the post office where or financial institutions the original documents were issued. Subject to verification, the concerned issuer provides the duplicate KVP certificates.
- Can minors invest in KVP certificates?
Adults can apply for these certificates on behalf of minors, though minors cannot invest themselves.