KVPs are available in the denominations of Rs 1000, Rs 5000, Rs 10,000 and Rs 50,000, and have no maximum limit on investment.
Kisan Vikas Patra (KVP) is a small savings scheme of the government in which the principal money gets doubled during the tenure of investment. KVPs are available at Post Office branches.
Originally introduced in 1988, KVP became very popular due to easy availability, no paper work, ease of transfer, sovereign protection, attractive rate of interest at the inception. People used to treat it a valuable gift item as the maturity amount was payable to the holder of the certificate.
However, due to easy transferability and lack of paper work, it was used rampantly for money laundering and cases of theft of KVP certificates also started rising. As KVP had became a money laundering instrument, it was withdrawn in 2011 following recommendation of a government committee.
KVP has been reintroduced in 2014 with mandatory KYC norms, so that it can’t be used for the purpose of money laundering. Here are some of the features of the new KVP.
- To invest in KVP, you don’t have to open any account. You have to visit a nearby Post Office and pay the amount you want to invest.
- The minimum amount of investment in KVP is Rs 1,000 and thereafter in multiple of Rs 1,000.
- To invest more than Rs 20,000, you have to open a Post Office Savings Account.
- Currently, the rate of interest on KVP is 7.7 per cent per annum, which will make your principal amount double in 112 months, that is in 9 years 4 months.
- However, in case of urgent need, you don’t have to wait till the maturity, as the investment amount may be withdrawn prematurely after completion of the lock-in period of 2 years 6 months.
- Nomination may be done by filling a separate nomination form. In the case of demise of the investor during the investment period, the nominee or the legal heir has to fill a claim application form, asking the Postmaster for settlement of the dues.
- The principal amount is completely safe as KVP bears sovereign guarantee of the Government of India.
- The interest rate on KPVs are declared by the government on quarterly basis and the payout is also guaranteed.
- KVP is not a tax effective instrument and neither the amount invested in KVP are not eligible for deductions u/s 80C, nor the interest and maturity amounts enjoy any tax benefits.
- KVPs may be used as a collateral to avail secure loans, which are cheaper than unsecured loans.