Understanding the Kisan Vikas Patra
Before you invest in any savings plan, you should try to know it in and out. The Kisan Vikas Patra is a savings scheme managed directly by the Government of India. The scheme's primary objective is to help individuals accumulate wealth over time.
Also, the Kisan Vikas Patra scheme wants individuals to inculcate a habit of saving money. The Kisan Vikas Patra Scheme is a post office scheme launched in 1988. The scheme wanted people to understand the importance of long-term savings and inculcate a financial discipline.
Earlier, the scope of the KVP Scheme was only limited to farmers. However, the scope has broadened, and anyone who meets the eligibility criteria can invest in the Kisan Vikas Patra. Vikas Patra has a tenure of 124 months, meaning your money will remain invested in the savings scheme for about ten years.
You need to apply for a certificate by reaching out to a post office or a few public sector banks chosen by the Government of India. This guide will help you understand everything you need to know before investing in the Kisan Vikas Patra Scheme.
Types of Certificates under the Kisan Vikas Patra
Three types of certificates are issued to individuals under the Vikas Patra scheme. These certificates include:
Single Holder Type
This account is the most popular one when it comes to the KVP Scheme. Here, the KVP certificate is issued to a single adult.
However, an adult can also get this certification on behalf of a minor who wants to invest in the Kisan Vikas Patra. The certificate will hold the adult's name until the minor becomes 18.
Joint A Type
In the case of a Joint A account, the certificate is issued to two adults who jointly open the account.
Once the scheme matures, both adults will receive a payout from the KVP scheme. However, if one of the account holders dies, the entire amount goes to the alive individual.
Joint B Type
Even a Joint B account involves two individuals, and the KVP certificate is issued in the name of both individuals. However, unlike the Joint A account, only one of the two adults is entitled to the final payout once the scheme matures.
Eligibility for the KVP scheme
Before you apply for the Kisan Vikas Patra Scheme, you must check your eligibility for the same. You must meet all the criteria the Government of India laid down before applying for the KVP Scheme. These criteria include:
- The applicant must be a citizen of India.
- The applicant must be at least 18 years to be eligible for the scheme.
- If the applicant is a minor, they can ask an adult to apply on their behalf.
- If the applicant is a part of a Hindu Undivided family or is an NRI, they cannot apply to Kisan Vikas Patra.
You must meet all of these criteria to become eligible for application.
Features of the Kisan Vikas Patra Scheme
The KVP Scheme has several features, and it comes with multiple benefits. You can apply for a Kisan Vikas Patra online or offline, depending on your application preference. Let's look at some of the important features of Kisan Vikas Patra.
Protection of the Capital
Unlike other investments, the KVP Scheme is not subjected to market risks.
Hence, the investment is considered safe, and your principal remains invested in the scheme for the entire tenure. The gains and the principal will be credited to you once the scheme's tenure ends.
The Kisan Vikas Patra provides assured returns to people who invest in the scheme. The scheme guarantees a return and delivers the same at the end of tenure, even if it goes through market fluctuations.
The inception of the fund was based on the objective of helping farmers. Hence, the government tries its best to deliver the promised returns.
The Interest Rate
The interest rate for the Vikas Patra scheme changes every year. It also depends on the number of years for which the money remains invested in the scheme.
The interest rate is 6.9% per annum for 2022-23. The interest is compounded annually to maximize the returns on the money invested in the scheme.
Maturity of the Scheme
The maturity period of the scheme is 124 months, i.e., slightly more than ten years.
Once 124 months pass, you will receive the entire corpus and interest earned on the Kisan Vikas Patra Scheme. The interest will be accrued for the entire duration till you make the withdrawal.
Taxability of the Scheme
As the KVP Scheme is not a part of 80C investments, the returns are subject to income tax. The income tax will depend on the slab that you are part of. However, the corpus is exempt from Tax Deducted at Source or TDS.
The scheme allows you to make a premature withdrawal to fund your requirements if you get an order from the court or in the event of the account holder's demise. However, you cannot withdraw the funds for the first 30 months.
Are you interested in investing more money into the KVP Scheme? If yes, you can invest any amount under the scheme, as it does not come with a maximum limit.
You can invest money in denominations of INR 1,000, INR 5,000, INR 10,000, and INR 50,000 based on the money you have kept aside for the scheme. However, if you want to invest INR 50,000 or more in the scheme, you should visit the head post office.
A Loan Collateral
The best thing about Kisan Vikas Patra is its versatility. The scheme documents can be submitted as collateral if you want to take a loan. Also, if you use your KVP certificate to get a loan, you might get some relaxation in terms of the loan's interest rate.
The Kisan Vikas Patra Scheme allows you to appoint a nominee for the fund. In case of the account holder's demise, the entire corpus goes to the nominee appointed by the account holder.
You can collect a nomination form from your nearby post office and fill up all the details. If you want to nominate a minor for the scheme, you must state their date of birth on the form and indicate that the nominee is a minor.
You get the KVP certificate at the post office or the bank if you make a cash payment towards the scheme. However, if you go for a cheque or a demand draft to make the payment, you will have to wait for the certificate till the post office gets clearance and receives the amount.
KVP Identity Slip
Once all the formalities are over, you will receive an Identity Slip from the post office or the bank where you have applied for the scheme.
The slip comes with the KVP certificate, the serial number for the scheme, the final maturity date of the scheme along with the sum that you will receive post the date of maturity of the scheme.
Documents Required for Investing in the Kisan Vikas Patra Scheme
The government has created a list of documents that must be presented when you avail of the KVP Scheme. You must collect these documents and present them when the account is created. These documents include the following:
- A duly filled Form A.
- Form A1 if you are investing via an agent.
- KYC documents like Aadhar Card, Driving License, etc.
Only when you submit these documents will you receive a KVP Certificate. However, you can apply for a copy if you lose the original certificate. You need to contact the post office or the bank where you received the original KVP Certificate.
Interest Accrual with Kisan Vikas Patra
The risks associated with the Kisan Vikas Patra are quite low. The following table shows how the interest gets accrued if you invest INR 1,000 in the Kisan Vikas Patra Scheme.
|Time||Amount Repaid (INR)|
|2.5 years but < 3 years||1154|
|3 years but < 3.5 years||1188|
|3.5 years but < 4 years||1222|
|4 years but < 4.5 years||1258|
|4.5 years but < 5 years||1294|
|5 years but < 5.5 years||1332|
|5.5 years but < 6 years||1371|
|6 years but < 6.5 years||1411|
|6.5 years but < 7 years||1452|
|7 years but < 7.5 years||1494|
|7.5 years but < 8 years||1537|
|8 years but < 8.5 years||1582|
|8.5 years < 9 years||1628|
|9 years < 9.5 years||1675|
|9.5 years < 10 years||1724|
|10 years but before maturity||1774|
|On maturity of the certificate||2000|
Here, the money becomes double at the end of the maturity period. Therefore, the returns on the scheme are considered to be decent.
How to Invest in Vikas Patra
You must follow a few steps to invest in the Kisan Vikas Patra Scheme. A step-by-step approach will help you in navigating through the entire process.
Step 1: Collect the required forms from your nearest post office or a prescribed public sector bank.
Step 2: Submit the duly filled form to any of these institutions based on proximity.
Step 3: If you are investing in an agent, the agent must fill the Form A and submit it to the post office.
Step 4: Once you submit the form, you must submit the address proof and the KYC documents.
Step 5: The post office or the bank will verify the documents and ask you to make the payment. You can make the payment in cash, via cheque, or a demand draft.
Step 6: Once the post office or the bank receives the payment, you will receive your KVP certificate. You must keep the certificate with you until you receive the maturity amount.
You can also apply for the Kisan Vikas Patra online. In the case of an online application, you can download the application form and Form A from the government's website. You can make a payment for the same via a demand draft and submit your e-mail id, where you will receive all the scheme documents.
Nomination for the Scheme
Both single and joint scheme account holders can nominate someone as the nominee of the scheme by filling up all the details of the person in Form C. You need to fill out this form while you invest in the scheme.
In the event of the demise of the single or joint account holders, the nominee will receive all the benefits and the maturity amount of the scheme once it matures. However, if the account holders fail to nominate someone during the scheme's inception, they can do so later but before the maturity date.
The account holders must also submit Form C to the post office or the public sector bank. If an adult holds an account on behalf of a minor, they are not allowed to choose nominees for the account. Any nominations made in this case will be considered null and void.
Also, if the account holder has more than one KVP account, they must fill out Form C separately for all the accounts and select a nominee for all. Selecting the first nominee is free of cost. However, if you want to make any alterations or additions, you must pay INR 20 for every application.
A Kisan Vikas Patra Scheme is a great investment for anyone looking for a good long-term investment option. The scheme comes with a low risk, and your corpus remains protected till the maturity of the scheme. While the maturity period is fixed, the scheme is flexible in other aspects.
You can appoint a nominee for your scheme who gets access to the funds in case of your demise. Also, you can transfer ownership of the scheme from one owner to combined owners or from combined owners to a single owner.
You can also shift the account from one post office to another for ease of managing the scheme. You must go through all the scheme clauses before investing.
Can a scheme be transferred from one post office to another?
You can transfer your KVP Certificate to another post office from the one where the certificate was originally issued.
You must submit a handwritten consent to the officer at the post office if you want to make the transition. The transfer can only be made if you meet all the eligibility criteria the Government of India laid down.
What should I do if I lose my original KVP Certificate?
If you lose your KVP Certificate, you can apply for a duplicate. You must write to the officer in charge of the post office where your certificate was issued.
You must have the identity slip that was issued to you during the inception of the scheme account. In case you have lost all the relevant documents, you may contact the post office for further course of action.
Who cannot apply for a KVP Certificate?
Any person who does not meet the government's eligibility criteria cannot apply for the Kisan Vikas Patra Scheme. Also, NRIs and HUFs are not eligible to apply for a Kisan Vikas Patra Scheme.
Does the interest rate for the Kisan Vikas Patra fluctuate every year?
The government decides on the interest rate for Kisan Vikas Patra every year. Hence, it changes based on the changes in the market and the decision of the government. The interest rate stands at 6.9% for the first quarter of the year 2022-23.
Do I have to pay taxes on the returns earned via Kisan Vikas Patra Scheme?
The Kisan Vikas Patra is not covered under 80C deductions. Hence, you will have to pay taxes on the returns earned via the scheme. The income tax rate will depend on the income slab you fall into.