Kisan Vikas Patra (KVP)

Kisan Vikas Patra (KVP) is a government-backed savings scheme designed to help farmers and individuals living in rural areas save money for their future needs. This scheme was launched by the government of India in 1988, with the objective of promoting small savings among people living in rural areas.

Under this scheme, individuals can invest their money for a fixed period and earn a fixed rate of interest. The scheme provides an attractive interest rate and a secure investment option to individuals who may not have access to other investment options.

Here's everything you need to know about Kisan Vikas Patra:

Eligibility criteria:

• Any Indian citizen, above the age of 18 years, can invest in KVP.
• Non-resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not eligible to invest in KVP.
• The scheme can be opened in the name of an individual or on behalf of a minor.

Account opening: The account can be opened at any post office or authorized banks across India. The investor needs to provide the following documents at the time of account opening:

• Identity proof and address proof of the investor
• Passport size photograph of the investor

The minimum investment amount for opening the account is Rs. 1,000, and there is no maximum limit on investment.

Interest rate: The current interest rate for KVP is 6.9% per annum, which is compounded annually. The interest rate is subject to revision every quarter by the government.

Deposit period: The scheme offers two deposit periods - 124 months and 30 months. The investor can choose the deposit period as per their requirement.

Deposit amount: The investor can invest any amount in multiples of Rs. 1,000, subject to no maximum limit on investment.

Withdrawal: The investment in KVP matures at the end of the deposit period. The investor can then withdraw the principal amount along with the interest earned.

Tax benefits: The investment in KVP is not eligible for tax deductions under section 80C of the Income Tax Act. The interest earned is taxable, and TDS is applicable if the interest income exceeds Rs. 10,000 in a financial year.

Transfer of account: The KVP account can be transferred from one post office or bank to another, anywhere in India.

Benefits of KVP:

• The scheme provides a secure investment option to individuals who may not have access to other investment options.
• The scheme offers an attractive interest rate, which is higher than that offered by most other saving schemes.
• The scheme has a long tenure, which provides ample time for the investments to grow.
• The scheme is easy to open and operate.

Limitations of KVP:

• The investment in KVP is not eligible for tax deductions under section 80C of the Income Tax Act.
• The interest earned is taxable, and TDS is applicable if the interest income exceeds Rs. 10,000 in a financial year.
• The investment in KVP is not suitable for individuals who require liquidity.

In conclusion, Kisan Vikas Patra is a suitable investment option for individuals who want to save money for their future needs. The scheme provides an attractive interest rate, a secure investment option, and a long tenure, which makes it a suitable investment option for individuals living in rural areas. However, the investment in KVP is not eligible for tax deductions under section 80C of the Income Tax Act, and the interest earned is taxable, which limits its appeal to some investors.