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Last Updated : Jul 18, 2019 10:53 AM IST | Source: Moneycontrol.com

Kisan Vikas Patra (KVP) - Features, Benefits and its Types

KVP or Kisan Vikas Patra is a saving scheme introduced by the government. To learn more on KVP Schemes, visit Moneycontrol today!

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The government scheme that was originally designed for farmers is now open to all. Kisan Vikas Patra (KVP) is a government-sponsored saving scheme that was initially designed specifically for farmers but is now open to all. Although the name of the scheme suggests that it is for farmers alone, you can also invest in the scheme, save money and accrue interest on your savings.

The scheme, one of the most popular ones among farmers, was aimed at helping farmers save a part of their income and was launched as a savings certificate for farmers.

The KVP was launched in 1988 as a saving certificate for farmers. It was, however, discontinued in 2011 after it was used for money laundering purposes. The scheme was re-launched in 2014 with modifications to curb misuse.

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Under the KVP scheme, you can make a minimum investment of Rs 1,000 to purchase a KVP certificate. The amount is invested for a minimum period of 112 months, which is equivalent to nine years and four months. Investments can be made in multiples of Rs 1,000 only, and there is no upper limit on the investments, which means you can invest as much as you want. For any investment over Rs 50,000, you have to produce your PAN details.

Now unlike other government-sponsored saving schemes, KVP doesn’t offer any tax benefits. What it offers instead are guaranteed returns. Currently, the rate of interest on savings in KVP scheme is 7.7 per cent compounded annually, which means that at the time of maturity your investment will have doubled. The rate of interest is, however, subject to review and revision by the government every quarter.

In case you wish to withdraw your savings before the maturity period, you can encash your certificate after completing two and a half years since the date of issue of your certificate.


Features of Kisan Vikas Patra


 The KVP scheme is a low-risk saving tool that is safe because it is promoted by the government. So, if you are not willing to take risks and still want high returns, this is a good option for you.

Certificates are issued for the amount invested in the scheme. The minimum amount that one needs to invest in this scheme is Rs1,000. Investments are to be made in multiples of Rs1,000 as certificates are available in only four denomination—Rs 1,000, Rs 5,000, Rs 10,000 and Rs 50,000.

Unlike many other schemes, there is no maximum limit on investments. However, for any investments above Rs 50,000, a PAN card is mandatory. This was one of the steps introduced in 2014 to curb misuse. The scheme allows you to purchase a certificate for yourself or on behalf of your child or purchase jointly with another adult.

The interest on the investments in a KVP certificate is decided by the ministry of finance, the Government of India, and is not directly related to market risks. The government reviews the interest every quarter and tweaks it frequently. As on January 1, 2019, the interest rate was fixed at 7.7 per cent compounded annually. If you purchase a KVP certificate today, you will get an interest of 7.7 per cent, even if the rate has gone up or dropped at the time of maturity.

One can purchase a KVP certificate from the nearest post office or one of the select banks that offer the certificate. That makes the scheme easy to access. In case you have to move out of the city where you purchased the certificate, you can your certificate transferred from one post office to the other. You can also choose to transfer your KVP certificate to someone else.

Yet another feature of the scheme is that it allows you to nominate a family member who will be eligible to withdraw funds in case of your death.

 

Interest Rate of Kisan Vikas Patra


The KVP promises to double your investment in nine years and four months. The scheme is currently offering a 7.7 per cent rate of interest on your investments for nine years and four months. The interest is compounded annually. Therefore, if you invest a certain amount in the scheme, you will get almost double your investment at the end of the 112 months.

The rate of interest is subject to change. The rate is decided by the union ministry of finance. The ministry reviews the rate every quarter. In the past few quarters, the rate of interest has grown slowly. As on January last year, the maturity period of the scheme was 118 months and the interest rate was 7.3 per cent compounded annually. From October last year, the maturity period was revised to 112 months. In last October, the rate of interest was revised to 7.7 per cent compounded annually and has remained still since.

Although the rate of interest may change, the return an investor will get at the end of the maturity period is guaranteed at the start of the certificate. The maturity value calculated based on the current rate of interest is pre-printed on your KVP certificate at the time of purchase. This means that even though the rate of interest has changed at the time of maturity, your returns will not be affected by the change. You will get what you were promised, even if interest rates have dropped. This is why the KVP is considered one of the safest investment options.

 

Benefits of Kisan Vikas Patra


One of the biggest benefits of the KVP scheme is that is safe. The KVP offers guaranteed returns and is protected from market fluctuations. Another reason that the scheme is safe is that it is sponsored by the government.

The scheme promises to double your investments in a little less than 10 years. All you need to do is purchase a KVP certificate when you have a significant sum of money. Unlike many other government schemes, you need not make regular payments for long periods to receive good returns. Another benefit is that there is no upper limit on how much you can invest in this scheme. You can invest as much as you want. Investors can choose to nominate a family member, who will be eligible to receive the funds, in case of your death. The scheme is also ideal for all age groups as there are no age restrictions for purchasing a certificate.

Unlike many other long-term saving schemes, the KVP allows investors to make premature withdrawals. However, if you withdraw within one year of purchasing the certificate, not only will you lose the interest, you’ll also have to pay a penalty. If you withdraw between one year and two and a half years since purchasing the certificate, there will be no penalty, but your interest will be reduced. Withdrawal any time after two and half years is allowed and doesn’t attract penalty or reduction in interest.

Accessing a KVP is easy as they are available at all post offices and select public sector banks. Cooperative banks and societies are not allowed to invest in KVP.

The KVP certificate acts as a critical tool when the investor is looking for a loan. The KVP certificate not only acts as collateral but can also help the investor negotiate interest rates on the loan.

 

Kisan Vikas Patra Types


According to the National Savings Institute, there are three types of KVP certificates.

In the Single Holder type, a person makes an investment, and the KVP certificate is issued to him on his name. A person can also make an investment on behalf of a minor. In this kind of certificate, you can only nominate a family member, who will receive the funds, in case you die. The scheme also allows the investor to transfer the certificate to another individual. For instance, you purchase a KVP certificate worth Rs1,000 on your own name. You can ask for a transfer of the account to your spouse’s name.

A joint ‘A’ type certificate is issued for two adults who have invested jointly. In this case, upon maturity, the amount will be paid to both the holders jointly or to the survivor. In this account, too, you can nominate members who will receive the funds upon your death. The scheme also allows the transfer of certificate from joint holders to another person.

There is a third type of certificate that can be purchased. The joint ‘B’ type certificate is issued to two adults investing jointly. However, under this type of certificate, when the investment matures, either one of the account holders will get the money. In case the person eligible to get the funds dies, the funds will go to the surviving account holder. This account, too, allows for nomination of a family member in case of death of account holders. These accounts can also be transferred to another person, according to the national savings institute.


Kisan Vikas Patra Online


The application process for Kisan Vikas Patra is not available online. However, since last year, the government has made the application forms available online. It is known as ‘Form A’.

To invest in the scheme, you can either visit your nearest post office or one of the public sector banks offering the scheme or you can download the application form the websites of India Post or one of the banks offering the scheme. You can also locate the nearest branch where you can submit your application and purchase the certificate. This will not only save your time looking for a branch but will also help you avoid long queues to get an application form.

In the form, you have to fill up your personal details. Apart from mentioning the investment amount and the mode of payment, you also have to choose the type of certificate you want. You can ask for a single type certificate or joint A or join B type certificate, depending on what you need. You can also fill in details of any nominee you wish to have who would be eligible for withdrawing the funds in case of your death.

Once you have filled up all other details, you can submit the form at your nearest post office or branch of a bank that offers the scheme. A certificate will be issued to you after the bank/ post office completes the remaining formalities.


Kisan Vikas Patra Eligibility


Any Indian citizen who is over 18 years of age can invest in this scheme and buy a certificate. There is no upper age limit for the scheme, which means senior citizens, too, can invest in the scheme.

The scheme also allows minors to invest and purchase a KVP certificate. However, the account has to be held by an adult. Minors can only invest in the case consenting adult purchases the certificate on behalf of them.

Two adults can also opt for a joint account and purchase a certificate together. They can choose from two options—Type A and Type B. The Type A account ensures that at maturity, the funds are paid to both account holders or the survivor of the two. In Type B, however, the funds upon maturity are paid to either of the account holders or the survivor of the two.

Only those Indians residing in India are eligible to purchase a KVP certificate. Non-resident Indians are not allowed to invest in a KVP scheme. Apart from NRIs, Hindu-Unified Families can’t purchase a KVP certificate. The scheme allows trusts to purchase a KVP but companies cannot purchase a KVP certificate.


How to open a Kisan Vikas Patra account


A KVP account can be opened by walking into the nearest post office. If you are interest in purchase a certificate, you can also visit one of the nationalized banks that offer the scheme.

To make matters easier for the investor, the government, as well as banks, have made the application available online. Before you go ahead with the purchase, you can also refer to the brochures that the government, as well as banks, provide online detailing the features of a KVP certificate. You can also locate the nearest bank branch around you that offers KVP certificates for purchase. Or you can choose to make a purchase through an agent.

If you wish to follow the process and make the purchase on your own, you can start by downloading the application form ‘Form A’ from the India Post website. Duly fill your personal details as well as details of your mode of payment. Choose your account type. Fill in the details of nominees, if any.

Once the application is filled up, you can walk up to your nearest post office (or a bank branch that offers KVP certificates). Make sure that you ‘Know Your Customer’ (KYC) process are completed. If not, the staff at the post office will help you complete it. You will need an identity proof which could be in the form of your passport, driving licence or Aadhaar card.

The post office staff will verify your documents and complete your KYC process. You can then make the payment. Once you make the payment, you will be issued a KVP certificate.

Now if you are purchasing a KVP certificate through your agent, you will have to give in your details to your agent who will fill up the ‘Form A1’. Once that is done, the rest of the process is the same.

Once you receive your KVP certificate, make sure to keep it safe. You will get your maturity funds upon producing this certificate. India Post is now providing soft copies of KVP certificates via email. You ask the post office or bank staff to share the KVP with you via email.


KVP maturity period


An investment in the Kisan Vikas Patra scheme matures in 112 months. This means returns are reaped after nine years and four months since the time of investment. The maturity period was recently revised by the central government.

The maturity period was last revised in September last year. Earlier the maturity period for the scheme was 118 months. The government made some tweaks to the scheme. It revised the maturity period by cutting short six month. The rate of interest was increased from 7.3 per cent compounded annually to 7.7 per cent compounded annually. The changes came into effect from October 1, 2018.

This means that the KVP scheme could now double the investment at the time of maturity, which is less than a decade. The certificate can be encashed at the post office from where it was purchased. So, if for instance you bought a certificate for Rs 1 lakh in July, 2019, you will get Rs 2 lakh in October, 2028.

The scheme has a minimum lock-in period of 30 months or two and a half years. If the certificate holder decides to withdraw the funds after two and a half years after purchasing the certificate, no penalty will be levied. The interest accrued on the funds will also be given out to the investor. Any encashment before two and a half years could either invite penalty or lead to reduced interests. If you withdraw within a year of purchase, a penalty will be levied, and you will not get any interest. If you withdraw after a year but before two and a half years, no penalty will be levied but the interest you receive will be reduced.

Both the interest rate and the maturity period are subject to change according to the interest rates prevalent in the market.

 

Loan against Kisan Vikas Patra certificate


All subscribers of the Kisan Vikas Patra scheme are eligible for loan at lower rates by using their certificate as collateral or security. This means that anybody holding a KVP certificate by their name can apply for a loan. Every bank accepts KVP certificate as collateral or security, provided that the name on the KVP certificate matches that of the applicant.

Loans will be granted for personal and business purposes only, such as expansion of business or marriage of a child. Most banks do not accept ‘speculative’ purposes as valid reasons for loans.

The amount of the loan that can be given to an applicant depends on various factors such as the KVP investment amount and the age of the KVP certificate. The minimum loan amount varies from bank to bank. For instance, the minimum loan one can take from Allahabad Bank against a KVP certificate is Rs10,000. On the other hand, the minimum loan amount offered by Bank of Baroda against a KVP certificate is Rs3,000. Some banks also have an upper limit to the loan made out to KVP certificate holders. The margins are usually drawn on the basis of the amount invested in the KVP scheme.

The rate of interest for loans made to KVP certificate holders is slightly lower than the bank’s regular loan rates. However, these rates vary from bank to bank. The banks may also offer different rates for different age of the KVP certificate.

Many banks have floating interest rates for these loans. In case the rate of interest changes, the person who has availed the loan be informed. Many banks also charge a processing fee for loans against KVP certificates.

The loan has to be repaid within the time frame of the KVP certificate. This means that no matter when you avail the loan, it has to be repaid by the maturity date of the KVP certificate.

 

KVP rules and guidelines


Following are the rules and guidelines to be followed for those seeking to or holding a KVP certificate:

Application: A KVP certificate cannot be purchased online. The application form for a certificate can be found online. It is known as Form A. Download the form and fill up the details. Submit the filled-up Form A at the nearest post office or one of the banks that offer the scheme. You can also ask for Form A for KVP at the post office or bank.

Certificate: Once you submit the Form A and make the payment, you will be issued a KVP certificate. It is governed by the Government Savings Certificate Act of 1959. The certificate is a government assured proof that the returns promised to you will be given to you at the end of the maturity period. You need to keep it safely or carefully and produce it at the time of withdrawal.

Types of accounts: You can open three types of accounts. The first kind is the ‘Single Holder’ type, where the certificate is issued in the name of an adult or on behalf of a minor. The second one is the ‘Joint A’ type, where the certificate issued in the name of two adults. Upon maturity, either both account holders will receive the money or the survivor among the two will. The ‘Joint B’ type certificate is also issued in the name of two adults. However, in this case, either of the two is eligible to get the money or whoever is the survivor gets it.

Investment: The minimum amount for which you can buy a certificate is Rs1,000. There is no upper limit on the investment. It has to be in multiples of Rs1,000. Certificates are issued in the denominations of Rs1,000, Rs5,000, Rs10,000 and Rs50,000. Any investment above Rs50,000 will require PAN details of the investor.

Nomination: Investors are allowed to nominate a family member or friend for the certificate. The nominee will hold the certificate in case the primary certificate holder dies. The nominee will also receive the total funds upon maturity.

Maturity period: The maturity period is fixed at 112 months, which is equal to nine years and four months.

Withdrawal rules: You can withdraw the return amount at the end of the maturity period. You can also withdraw it prematurely. In case you withdraw the funds within a year of purchasing the KVP certificate, you will not get any interest and a penalty will be imposed. If you withdraw after a year but before two and a half years of purchasing the certificate, no penalty will be imposed but the interest you receive will be reduced. Withdrawal after 2.5 years of buying the certificate does not invite any charges or penalties. You will receive interest as promised.

Encashment of certificate: You can encash your KVP certificate at the post office or bank branch where you purchased the certificate. However, in case of emergency, you can also encash it any other post office or branch, upon the approval of the postmaster or manager of the branch.

Loss of certificate: In case of loss or damage or wear and tear of a certificate, the investor can apply for a duplicate. You must know the certificate number and the date of maturity before applying for a duplicate. The application can be made at the branch where the certificate was purchased.


FAQs


I am not a farmer. Am I eligible for Kisan Vikas Patra?


The Kisan Vikas Patra scheme is available to all Indian citizens, excluding NRIs and Hindu united Families. The scheme was initially launched as a small saving scheme for farmers in 1988. However, when it was re-launched in 2014, the scheme was made available for all Indian citizens.

What is the interest rate of the KVP scheme?


The rate of interest of the KVP scheme is subject to change. It is decided by the central ministry of finance. Every quarter the rate of interest is reviewed. The rate may be revised if the ministry deems it fit. As on January 1, 2019, the rate of interest for the KVP scheme was 7.7 per cent compounded annually. This gives investors almost double their investment at the end of the maturity period.

Is there tax benefit in the KVP scheme?


The Kisan Vikas Patra scheme does not provide any tax benefits. It is not meant for people looking for investments for tax-saving purposes. There is no tax deduction on the investment, or the interest accrued. However, although the maturity amount is taxable, it is deducted at the source and doesn’t affect the investor.

Can I transfer my KVP certificate to someone else?


Yes, you can transfer your KVP certificate to someone else. The scheme allows investors to transfer both individual and joint accounts transferred to other people. You can also transfer your certificate from one post office to another.

What happens if I lose my KVP certificate?


If you lose your KVP certificate, you need not worry. Make sure to keep your certificate number and maturity date saved on your phone or a notebook in case the certificate is damaged due to wear and tear. As long as you have the certificate number and maturity date, you can apply for a duplicate at the branch that you purchased the certificate from. If you make the application at a different branch, it will be forwarded to the original branch. A duplicate will be issued to you.

Do banks offer KVP scheme?

Yes, some banks do offer the KVP scheme. Apart from all post offices, most nationalised banks offer the KVP certificate. Banks that are approved for offering the Public Provident Fund scheme, also offer the KVP certificate. All State Bank of India branches and subsidiaries offer KVP. However, co-operative banks are not allowed to offer KVP scheme.
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First Published on Jul 18, 2019 10:51 am
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