secure investment kisan vikas patra

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Are you a risk averse investor? Are you looking at investing in some debt instrument? Are you done with your tax saving investments and have also exhausted your PPF limits? You do not want regular income and don’t mind locking your money to earn double returns.

Then Kisan Vikas Patra can be a an instrument where you can invest. While the name suggests that only a farmer can invest money in Kisan Vikas Patra it is not the case. Anyone wishing to invest money at safe places can go for Kisan Vikas Patra.

Kisan Vikas Patra (KVP) is a saving instrument that provides interest income similar to bonds. The KVP is a safe investment tool, as it is backed by the Government of India. The principal is assured and hence it is a safe avenue for investing your money. With low interest rate regime, such saving instruments are in limelight again.

Some features about Kisan Vikas Patra
KVP is available at all Head Post Offices and authorized post offices throughout India

The investment in KVP could be as small as Rs 100. It is available in denominations of Rs 100, Rs 500, Rs 1000, Rs 5000, Rs 10,000 and Rs 50,000. There is no upper limit and hence a person can purchase any number of certificates as one wish to invest. Further investing in it is also simple. One need not open any accounts. Just fill a form and you can purchase the certificates by paying cash, cheque or DD.

It can be purchased: by an adult in his own name, or on behalf of a minor, a Trust or two adults jointly

The best thing about KVP is that you double your money. If you invest Rs 1 lakh, you would earn Rs 2 lakhs after eight years and seven months. The maturity period is fixed. A rate of 8.41% per annum is offered at present. The interest on KVP is compounded half-yearly. This is more earnings, than fixed deposits.

Premature encashment of the certificate is not permissible except at a discount in the case of death of the holder(s), forfeiture by a pledgee and when ordered by a court of law.

KVP can be pledged as security against a loan to Banks/Govt. Institutions and are transferable to any Post office in India. Further, they are transferable from one person to another person before maturity.

Some drawbacks
1) While premature encashment is possible, it is after 2.5 years and turns out to be a costly affair as the yield would be
lower.
2) No tax benefit as compared to PPF and NSC.
3) The deposits are exempt from Tax Deduction at Source (TDS) at the time of withdrawal.
4) Interest income is taxable but no TDS
5) Deposits are exempt from Wealth tax.

Conclusion
When comparing to PPF and NSC it may not look to be a good investment. However, compared to a FD it offers a higher rate of return in the current scenario. While the interest earned on KVP is taxable in the same manner as interest income earned on bank FD, the KVP holder is not required to pay TDS unlike a bank FD where interest income of Rs 10,000 or more attracts TDS.

So when you commit yourself to tax planning this year see if you can allocate any excess funds you might have for KVP which would be a good investment option in the times of low rate of interest.

KVP is especially beneficial for people who do not require regular income and want the money at a later date and/or do not have taxable income. KVPs are attractive as an investment avenue with relatively better returns without any risk.