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Kisan Vikas Patra India Post: What is KVP Scheme

Kisan Vikas Patra India Post is a government-backed savings scheme originally designed particularly for farmers, but now any Indian citizen can invest in it. In fact, this government scheme was designed for farmers but is now open to all.

Although the name of the scheme indicates that Kisan Vikas Patra intended solely for farmers, now you can also invest in the KVP, save money, and earn interest on your investment.

KVP one of the most popular schemes among farmers is to help farmers save a portion of their income and was introduced as a savings certificate for farmers.

Kisan Vikas Patra was launched in 1988 as a certificate of savings for farmers. However, it was discontinued in 2011 after being used for money laundering purposes. The KVP was re-launched in 2014 with amendments to prevent misuse.

Advantages and Benefits of Kisan Vikas Patra India Post

In addition to being a safe alternative to investing more cash, the KVP scheme has several related features and benefits. The list below provides a brief overview of the scheme.

Guaranteed Return 

Despite market fluctuations, individuals who invest their money in this plan earn a guaranteed amount. This feature increases savings.

Compound Interest Rates

KVP scheme interest rates generally vary and vary according to the year in which the person concerned invested in it. The interest rate for the financial year 2019–2020 is 7.6%. The interest obtained from the invested amount is compounded every year, which guarantees the individual a greater profit.

Maturity 

The Kisan Vikas Patra scheme maturity is 124 months. At the end of this period, the scheme develops and expands a corpus to the holder of the KVP plan. In case, the person concerned decides to increase the yield that occurs later than the due date; the amount provides interest until it is withdrawn.

Investment Amount

Individuals can invest money in this scheme as little as Rs. 1,000 and they can invest as much as they want. However, the sum must be a multiple of Rs. 1,00 and the amounts over Rs. 50,000 need PAN information and would be extended by a city’s head post office.

Tax Policy

The amount withdrawn from post maturity is free from tax at source or TDS. However, the KVP scheme is not eligible for the tax exemption mentioned under Section 80C.

Nomination

Individuals can choose a nominee in this scheme. All they have to do is to fill out a nomination form, provide the necessary information about the nominee they have chosen, and submit it. Besides, individuals can also choose a minor as their nominee.

Loans against KVP Certificate

Individuals can get a loan against investment in the Kisan Vikas Patra scheme. When applying for a secured loan the KVP certificate acts as a guarantee and the KVP holder can get a loan at a lower interest rate.

Kisan Vikas Patra Account Types

There are three types of KVP accounts these are:

Single holder account: In a single KVP account the certificate is issued to adults. Adults can also obtain a certificate on behalf of minors; in that case, the certificate is issued in their name.

Joint type A account: In this type of account a KVP certificate is issued on behalf of two adults. On the due date (maturity) both account holders will receive payment. However, if one account holder dies, only one person is entitled to receive the payment.

Joint type B account: In this type of account, a KVP certificate is issued in the name of two adults. Unlike a joint type A account, at maturity, two account holders or survivors will receive the payment.

Also Read: Indian Post Office NSC Scheme: National Saving Certificate

Eligibility for Kisan Vikas Patra

Every Indian citizen over the age of 18 can invest in Kisan Vikas Patra India Post and purchase a certificate. The plan has no age restrictions, which means that older people can also invest in the KVP.

KVP scheme also allows minors to invest and purchase KVP certificates. However, the account must be represented by an adult. Minors can only invest if an adult agrees to purchase a certificate on their behalf.

Two adults can also open a joint account and purchase a joint certificate. They have two options to open a joint account i.e. Type A and Type B. A Type A account ensures that funds are paid out on the due date (maturity) to both the account holders or the ones who survive. However, type B funds are paid either to the account holder or both account holders.

Only those Indians who are living in India can purchase a KVP certificate. NRIs (Non-Indian Residents) are not eligible to invest in KVP programs. Apart from NRIs Hindu-Unified Families cannot purchase KVP certificates. Under this scheme, trusts can purchase KVP, but the companies are not allowed to purchase a KVP certificate.

What Documentation is Required for Kisan Vikas Patra?

By submitting the necessary documents eligible individuals can benefit from the Kisan Vikas Patra scheme.

Here is a list of documents that are considered necessary for the Kisan Vikas Patra India Post account. 

  • Form A should be submitted to the Indian Post Office or other designated banks.
  • Form A1 if the applicant applied through an Agency.
  • KYC documents such as passports, voter ID cards Aadhaar cards, PAN cards, driver’s license, etc these documents can serve as ID proof.

Upon submission of these documents mentioned above, a KVP certificate will be issued to the applicants. If the Kisan Vikas Patra certificate is lost or damaged, individuals may apply for another copy of the KVP. Such an application may be made through the institution where the certificate was first issued.

However, individuals must know the certificate number and due date (Maturity Date) before applying for KVP copies, and therefore the scheme holder must always have this information.

What is the Interest Rate of the KVP Scheme?

Interest rates in the KVP system may vary. It is decided by the Ministry of Finance. Interest rates are reviewed quarterly. The interest rate may be revised if the Ministry deems it appropriate. From Ist April 2020, the interest rate under the KVP scheme is 6.9 percent annually. This gives investors a handsome amount at maturity.

Are There Any Tax Benefits to  KVP Scheme?

The Kisan Vikas Patra scheme offers no tax benefit. It is not aimed at people looking for a tax savings investment. No tax deductions on the investments of KVP or the accrued interest. However, the amount of maturity is taxable and it is deducted at the source and does not affect the investor.

Maturity Period 

The maturity period for Kisan Vikas Patra is 124 months i.e. ten years and four months.

Kisan Vikas Patra Withdrawal

The Kisan Vikas Patra scheme can be discontinued before the maturity date. The capital sum and interest can be withdrawn. The premature withdrawal period of KVP is 2 years and 6 months from the date of issue of the KVP certificate, which is also the lock-in period. 

To obtain KVP pre-mature withdrawals, the holder has to give in writing to the post office, after which the amount will be given. Encashment of KVP is not allowed unless if the KVP holder dies or as per court orders.

Conclusion

A government-backed Kisan Vikas Patra India Post scheme was originally designed for farmers but this scheme is now available to all Indian citizens. Among farmers, KVP is one of the popular schemes and it was started as a saving certificate for farmers.

All Indian residents over the age of 18 can invest in this scheme. KVP has several benefits like guaranteed returns, compound interest, nomination facility, loan facility, etc. 

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