Indira Vikas Patra, initiated by the Indian government, encourages small investments. The scheme was initially meant for farmers, hence the name Kisan Vikas Patra (KVP). Later on, this investment became open to all.
Over time, the term Kisan Vikas Patra has been used predominantly over Indira Vikas Patra. To increase user understanding of the scheme, the term KVP will be used in the article. This article will cover its eligibility, types, interest rates, features, and benefits.
Know who can invest and how
What is Indira Vikas Patra or Kisan Vikas Patra or KVP?
Kisan Vikas Patra (KVP) is a small tax saving deposit scheme for inculcating a savings habit amongst rural people. Launched in 1988, it promises returns of double the amount invested in a specified period.
Presently, that period is 124 months or ten years and four months, if initiated in quarter 1 of FY21. Open to all investors, the scheme helps to keep surplus money in a safe investment. The applicable interest rate is 6.9% per annum, compounded annually by the government.
Who May Invest in KVP?
The Indian government backs the scheme. Hence, it ensures safe investment for risk-averse investors in rural and urban areas. Being a long-term investment scheme, it suits long-term financial goals. Thereby, they keep earning risk-free returns on investment.
How to Invest in KVP?
Individuals may open a KVP account with registered bank or post office accounts. For the scheme enrollment, investors may directly fill up form A from a bank or post office.
Likewise, the investors may download and fill up from online bank or post office websites. Upon filling it, they can submit it to their nearest registered providers. Documents necessary for this are-
- Passport-size photograph.
- ID proof, Address proof.
- Income proof for investments of INR 10 lacs and above.
- PAN card details for investments of INR 50,000 and above.
Eligibility Criteria for KVP
- The investor must be an Indian resident of age 18 years and above.
- Parents or guardians may invest on behalf of minors or disabled individuals.
- No NRIs and HUFs are eligible for this scheme.
Types of KVP accounts
Primarily, three types of KVP investment accounts are available.
- A single account: Issued to an adult for self or on behalf of any minor.
- Joint A account: This account can be issued jointly with a maximum of 3 adult members. All holders are entitled to receive the maturity amount.
- Joint B account: Jointly issued with a maximum of 3 adult members. However, a single holder or survivor receives the matured amount.
Core Features and Benefits of KVP
- Any Indian resident aged 18 years and above can open a KVP account. Up to 3 members may hold a joint KVP account, given they have registered post office or bank accounts.
- An individual can make a single high-interest deposit on a KVP account. The minimum amount for investment is INR 1000, with no upper investment limits.
- To prevent money laundering activities, investments above INR 50,000 require PAN card details of the investor. Investments above INR 10 lacs require income source disclosures.
- Investments made in the June quarter at 6.9% are compounded annually. The design doubles the returns upon completing 124 months. If no withdrawal occurs, the post office accrues. The maturity period is, however, subject to revisions.
- The fixed deposit for a senior citizen or a salaried or self-employed individual is not eligible for tax deductions under Section 80C.
- Easy transfer from one post office branch to another or an individual registered bank. The account is transferable under specified conditions. The users can fill up form B for a transfer request.
- For premature withdrawal, here are the rules:
- Withdrawal within a year will offer no interest on returns, following the payability of an additional penalty amount.
- For withdrawals within 2,5 years, there are low-interest calculations with no penalties.
- Withdrawals after 2.5 years will not cut any interest or penalty.
- Individuals may nominate a family member by filing Form C and providing necessary documents. The account holders may cancel or make nominee variations by filling form D.
To conclude
No tax exemptions are possible with the KVP scheme. However, the returns on investment are double the original deposit. This is what makes this government scheme popular among rural people. Not only does it save money, but it also helps users to get eligible loans against a KVP account. Now that you know about KVP, it’s time to invest wisely for a better future.
