On 18th Nov 2014, Government of India re-launched one of famous Postal Savings Scheme called Kisan Vikas Patra or KVP. It was mentioned in a Finance Minister’s budget speech also. So let us see its feature and feasibility.
How much you can invest?
There is no maximum limit specified. However, the minimum will be Rs.1, 000 and in denomination of Rs.1, 000, Rs.5, 000, Rs.10, 000 and Rs.50, 000. In addition, there is no limit in holding a number of certificates from an individual.
What is a period of Kisan Vikas Patra (KVP)?
This certificate will mature after 8 Yrs and 4 months. Your money money will double after 8 Yrs and 4 months. Therefore, interest will be 8.67%, which is annually compounding. For Financial Year 2015-16 the interest on KVP remained unchanged i.e. 8.7%.
Who can invest in Kisan Vikas Patra (KVP)?
As of now, only individuals allowed to invest in KVP. Therefore, this investment is not available for HUF, NRIs or companies.
What will be tax benefits for investing in Kisan Vikas Patra (KVP)?
As of now, you will not get any tax benefit while investing. In addition, earned interest at the end of maturity will be taxable income (taxed according to one’s tax slab, exactly like Bank FDs or NSC). 10% TDS will be there at the time of maturity.
Types of Kisan Vikas Patras (KVP)
- Single holder certificate-This certificate will be issued to an adult for himself, on behalf of a minor, or to a minor.
- Joint “A” type certificate-This certificate will be issued jointly to two adults and payable to both adults jointly or to the survivor.
- Joint “B” type certificate-This certificate will be issued jointly to two adults and payable to either of the holders or to the survivor.
How to buy Kisan Vikas Patra (KVP)?
A person desiring to purchase KVP must fill the Application Form A either in person or through agents to the Post Office or to Bank. Purchaser either can make the payment in cash or locally executed Cheque, DD, or Pay Order drawn in favour of the Post Master. In case you want to invest from the savings account, which is with the same post office or bank, then you need to submit duly signed withdrawal form or cheque together with passbook.
When you will get Kisan Vikas Patra (KVP)?
If you purchased KVP by cash, then it will be issued immediately. However, in case you purchased through cheque, DD or pay order, then the issue date will be the realising date of these instruments. In case due to any other reason KVP not issued to you then the provisional receipt will be issued. However, the purchaser needs to exchange it while issuing of KVP certificate. In this case, issue date of KVP will be a provisional receipt issued date.
Is it possible to transfer from one post office or bank to another post office or bank?
Yes, one can transfer it to any post office or other bank without any hindrance. For this, you need to submit Application Form B. This application must be signed by the holder or holders. However, in case of joint holding a single holder signature is enough in case of another holder is dead.
Can we transfer Kisan Vikas Patra (KVP) from one person to another?
You can easily transfer KVP from one person to another person by writing a consent letter to the Post Master of Bank. But do remember that no transfer shall be permitted in respect of Certificate held by or on behalf of a minor till the minor is alive. In all other cases, original holder must submit the KVP original certificate and the new certificate will be issued in the name of transferee.
In addition, one cannot pledge KVP easily unless the holder of the certificate is minor.
Whether can we nominate someone?
Single holder or joint holder of a certificate may nominate by filling Application Form C. You can nominate during the time of purchasing or at any point of time but before maturity. You can cancel or change the nomination by submitting the Application Form D. However, remember that for the first time nomination. But the subsequent nomination or cancellation shall be charged at Rs.20 per each change or cancellation.
Nomination facility not possible if the holder of certificate is held by or on behalf of the minor.
What if you not encash after maturity?
If you not encash the certificate even after the maturity period, then you will receive the post office savings interest rate which is applicable at that time on the whole amount payable to you on maturity. If you encash the certificate within one month from maturity, then no such interest will be payable.
What if you lost or destroyed certificate?
You can apply for a duplicate certificate if you lost it. But you need to submit an indemnity bond for the same along with identity slip. In case of mutilated or defaced certificate, you need to submit the original such defaced or mutilated certificate to get the original certificate.
Where to encash Kisan Vikas Patra (KVP)?
You can encash it in the same post office or bank where it is registered. In case of the different bank branch or post office then it may get delayed as the internal verification is required.
Whether one can encash it before maturity?
There is a lock in period of 2 Yrs and 6 months i.e. 30 months. After that, you can encash it before maturity. However, it may be liquidated even earlier too in case of below mentioned situations.
- Death of certificate holder or any of the holders.
- On forfeiture by a pledge being a Gazetted Government Officer.
- When ordered by a court of law.
Below is tabular representation of premature withdrawal table.
How the maturity amount is payable?
It will be directly credited to your savings account of post office or Bank. So at least while encashing the certificate at maturity one must have a savings account.
Is it the best product to invest?
- Nothing special when it comes to typical postal schemes.
- It offers the rate of interest of any typical fixed instrument.
- No tax benefit while investing or at maturity.
- Instead, if you opt for NSC or 5 Yr Tax saving FDs then your yield will be more.
- KVP will come with 2 yrs and 6 months of lock in. So you need to think about it before investing.
- No KYC or PAN means good for small investors but may be used for some unlawful activity. However, this time maturity will be credited to your postal savings account. So by doing this, Govt to certain extent protect such unlawful activities.