Kisan Vikas Patra (KVP)

Kisan Vikas Patra(KVP) is a safe long-term debt instrument. KVPs are issued by the Government of India. Eligibility: Any individual can purchase a KVP, singly or jointly. Investment Limits:  The minimum amount is Rs. 1000. There is no maximum limit. It is available in the denomination of 5000, 10,000 and 50,000.
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Rate of Return: KVPs come with a 7.30% rate of return, compounded yearly. Money invested in KVPs doubles in 9 years and 10 months (118 months) Issue of Certificates- In case of cash payment certificate will be issued immediately while in case of purchase by locally executed cheque, pay order or demand draft the same will be issued on realisation of such locally executed cheque, pay order or demand draft as the case may be. Time Period: KVPs have a maturity of 9 years and 10 months. Withdrawal: Investment in the certificate is locked until maturity. If the Certificates are encashed after 2 years and 6 months at values as per the table issued by Post Office. Tax Treatment: Interest on KVP is taxable on an accrual basis and will be taxed as Income from Other Sources. deduction under section 80C is not allowed on this investment. TDS is not deductible on Interest on KVP. Others:The Certificates can be transferred from one person to another after one year from the date of the certificate with the consent of the Postmaster. One can avail a loan against the KVPs by pledging them with the bank. FinPlan Café Note: Positives: Safe long term investments. Negatives: No periodic cash flows are received from investment in KVPs. No tax benefits associated with KVPs. Conclusion: Just like NSCs, KVPs is best suited for one looking for higher assured returns and safety of principal. One will have to compare the post tax returns on NSCs versus KVPs based on the tax slab applicable to each person before making a choice.
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