Pan Card

This government scheme offers higher interest rate than SBI FD, doubles the investment in 123 months|

This government scheme offers higher interest rate than SBI FD, doubles the investment in 123 months|

Kisan Vikas Patra

This government scheme offers higher interest rate than SBI FD, doubles the investment in 123 months

Photo: BCCL

Kisan Vikas Patra (KVP) is a government-sponsored savings scheme, initially designed specifically for farmers, but now open to all. The name of the scheme suggests that it is only for farmers, but you can also invest in the scheme.

Under this scheme, you can make a minimum investment of Rs 1000 to purchase a KVP certificate. The amount is invested for a minimum of 123 months or 10 years and 3 months. Investments can be increased only by Rs 1000 and there is no upper investment limit, meaning you can invest as much as you want. For any investment above Rs 50,000 you need to produce your PAN details.

Kisan Vikas Patra: Key Features

Unlike other government-sponsored savings schemes, KVP does not provide any tax benefits. Currently, the interest rate on savings in the KVP scheme is 7% per annum, which means that your investment will almost double in 123 months at maturity. However, the interest rate is reviewed and revised by the government every quarter. The rate offered by this small savings scheme is higher than the higher interest rate offered by State Bank of India, which offers 6.25% on deposits of 2-3 years and 6.9% to senior citizens on deposits maturing after 5-10 years.
The KVP scheme is a safe, low-cost tool as it is backed by the government. Certificates are issued for the amount invested in the scheme. The minimum amount to invest in this scheme is Rs.1000. Investments should be made in multiples of Rs 1,000 as the certificates are available in only four denominations — Rs 1,000, Rs 5,000, Rs 10,000 and Rs 50,000. PAN card is mandatory for investments above Rs 50,000. The scheme allows you to buy a certificate for yourself or on behalf of your child or jointly with other adults. The percentage of investments in the KVP certificate is decided by the Ministry of Finance and is not directly related to market risks.

Who can invest?

Any Indian citizen above the age of 18 can invest in this scheme and buy a certificate. There is no upper age limit for the scheme, hence senior citizens can also invest in the scheme. The scheme also allows minors to invest and purchase KVP certificate. But adults should keep the score. Minors can only invest if an adult buys the certificate on their behalf. Only Indians resident in India are eligible to purchase a KVP certificate. Non-Resident Indians are not allowed to invest in the KVP scheme. Apart from NRIs, Hindu-joined families cannot purchase a KVP certificate.

The scheme allows trusts to buy KVPs, but companies cannot buy a KVP certificate. A KVP certificate can be purchased from the nearest post office or from one of the selected banks that offer the certificate. This makes the scheme easy to access. If you have to move from the city where you bought the certificate, you can transfer the certificate from one post office to another. You can also choose to transfer your KVP certificate to someone else. The scheme allows you to nominate a family member who is entitled to withdraw the funds in the event of your death.

Blocking period

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 two and a half years after purchasing the certificate, no penalty will be imposed. Interest accrued on funds is also given to the investor. Any collection before two-and-a-half years may attract penalty or interest reduction. Withdrawals within one year of purchase will incur a penalty and you will not be charged any interest. If you withdraw after one year but up to two and a half years, there is no penalty, but the interest you get will be reduced. Both the interest rate and the repayment period may vary depending on prevailing interest rates in the market.

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