Indialends, 13 Apr 2021

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Kisan Vikas Patra Scheme

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The Kisan Vikas Patra scheme falls under those categories of saving avenues that help individuals in accumulating wealth over time without having a fear of any associated risk. It is one of the most popular saving schemes launched by the Government of India. 

This scheme was launched in 1988 as a small saving certificate scheme. The main objective of launching this scheme is to encourage people for adopting long-term financial discipline in their life. Initially, this scheme was only for the farmers, but now anybody can invest in Kisan Vikas Patra who fulfills the eligibility criteria.

The Kisan Vikas Patra Post office scheme comes with a present tenure of 113 months and extends the assured return to the individuals. Anybody can avail of it in the form of a certification from any branch of India Post Offices and selected public sector banks.

The KVP Scheme accounts are of three types –

Single holder Type: In this type of account, a KVP verification is allotted to an individual. In this, an individual purchases a certificate on behalf of a minor, in such case the certification would be issued in their name.

Joint A Type: In this type of account, a KVP certification is issued in the name of two individuals, both should be adults. At the time of maturity, both the account holders will get the payout. However, only one would be entitled to receive the same in the event of the death of one account holder.

Joint B type – In such a type of account, a KVP certification is issued to both adult individuals. Unlike Joint A type account, on maturity, either of the two account holders or the survivor would receive the pay-out.

Who should make an investment in Kisan Vikas Patra Scheme?

• It works best for the rural population who do not hold a bank account. It is a below-risk saving option.
• A risk-averse individual who is having extra cash will finds this scheme a suitable option to park their money safely.
• Based on the financial goals and risk profile, individuals who are over the age of 18 may consider investing in the KVP post office scheme.

Eligibility criteria to get Kisan Vikas Patra Scheme

To avail of the scheme benefits, individuals should meet the eligibility criteria mentioned below:

• Applicants must be residents of India.
• Applicants must be over the age of 18 years.
• Adults can apply on behalf of a minor.

However, NRIs and HUFs are not deemed eligible to invest in a KVP scheme. Similarly, companies would not be able to avail of this scheme.

Benefits of KVP Scheme

Besides being a safe option to park additional cash in, the KVP scheme comes with an array of features and associated benefits.

  Enjoy assured returns

The scheme is not affected by the market fluctuations, individuals who have invested their money in this scheme would enjoy a guaranteed sum as assured. This feature encourages an individual to save more with this scheme.

Works on compounding interest:

The interest rate of the KVP scheme tends to vary, and such variations depend on the year in which the individual made an investment. The rate of interest for the financial year 2019-2020 is 7.6%. The interest accrued on the invested sum is compounded yearly, ensuring more returns to individuals.

Time horizon

The tenure of Kisan Vikas Patra as discuss above also is 113 months. After completion of the period, the scheme matures and extends a corpus to a KVP scheme holder. 

In case, individuals decide to withdraw the proceeds generated later than the maturity period; the amount would accrue interest until it is withdrawn.

Cost of Investment

The individual can deposit money into the scheme with a little of Rs 1000 and invest as much as they want to. However, the amount has to be a multiple of Rs. 1,000 and a sum over Rs. 50,000 would require PAN details and would be extended by a city’s head post office.

Act as a tax saving scheme

The amount is withdrawn post maturity gets a tax exemption under Section 80C of the Income Tax Act 1961.

Add a nominee

Individuals can select a nominee in this scheme. All they would need to do is fill up a nomination form, offer the required details of their choice of nominees, and submit it. Also, Individuals can even select a minor as their nominee.

Loan against a certificate

The individuals can avail of a loan against their investment in the Kisan Vikas Patra scheme. The KVP certificate would act as collateral at the time of filing an application for the secured loan and individuals would be able to avail of a loan at a lower interest rate.

Documents Required Kisan Vikas Patra 

• Form A must be duly submitted to an India Post Office branch or other specific banks.
• Form A1 if the application is extended through an agent.
• KYC documents like Aadhaar Card, PAN card, Passport, Voter’s ID, Driving License, etc. serve as ID proof.
• On providing these documents mentioned above, applicants would be provided with a Kisan Vikas Patra certificate. In case of loss or damage of Indira Vikas 

Know the withdrawal procedure

• The individual can withdraw their proceeds either on maturity or before maturity.
• If the individual withdraws their investment sum within a year of purchase, you will not accrue any interest on it. Moreover, they would incur a penalty for it.
• If an individual chooses to withdraw their invested sum after one year, but before 2.5 years of purchase, then an individual becomes entitled to the low rate of return. Also, no additional charges or penalty would be imposed on it.
• To encash the KVP certificate, an individual is required to make a visit to the Post office or a bank branch from where they had purchased. At the time of emergency, an individual can encash the certificate from any of the nearest post offices or bank branches. Post the approval of the post manager or respective bank manager of the said institution, it is possible.