Kisan Vikas Patra

Note on Kisan Vikas Patra

Kisan Vikas Patra (KVP), a discontinued savings instrument three years ago was launched again. The new KVP positioning it as savings term ‘Small savings schemes’ such as the Public Provident Fund (PPF) and the National Savings Certificates (NSCs) like its previous schemes, it has certain advantages as well as disadvantages. Most ordinary investors will compare the new KVP with bank deposits and other debt instruments.


Major features of the new Kisan Vikas Patra:

·                     The Interest obtained in it is 8.7%.

·                     Tenure will be eight years and four months (100 months).

·                     Invested amount doubles in 100 months.

·                     The Minimum lock-in period will be two years and six months.

Liquidity details:

·                     KVP can be encashed in 8 equal installments per month after the lock-in period.

·                     This can be transferred to another person by endorsement and delivery.

·                     Can also be given as collateral for loans by banks

·                     Minimum investment in KVP will be Rs.1,000. Thereafter, in denominations of Rs.5,000, Rs.10,000 and Rs.50,000. There is no maximum limit in this scheme.

·                     This Scheme is fully taxable. Mode of investment can be done in either cash or cheque.

·                     PAN will not be required for Know your customer (KYC) but identity/address proof is mandatory.

·                     How to get KVP: This will be sold initially through post offices across the country, but later through some government-owned banks also.

Comparison of new KVP with bank deposits:

·                     The new KVP is reasonably liquid.

·                     Investors can come out after the minimum lock-in period in eight equal installments.

·                     The KVP can also be given as collateral. Unlike other schemes like PPF and NSCs, the KVP does not have a tax advantage interest on it will be fully taxable.

·                     KVP is not superior than Bank deposits in terms of returns, three year fixed deposits offer 9% and some banks even more. This will matter to senior citizens and others who want a fixed, steady return in the form of investment in infrastructure bonds.

·                     Bank deposits are liquid, absolutely secure and highly accessible to most middle-class investors. They have a minimum tax advantage but practically restricted to interest on savings accounts.

·                     By considering above you might get doubt "So what is the Use of KVP?"

·                     This will come in handy for those who have no access to banks, by investing in KVP may give a worthy proposition.

·                     Coming to "Having no tax concessions" answer for that is who do not pay taxes at all or are in the lower tax bracket...

·                     The biggest advantage claimed for the KVP is indeed its USP (bearer bond), transferable by endorsement and delivery. This confers unmatched anonymity to the holder of the instrument.

Know more about new KVP fare:
The KVP in comparison to its previous version, the new KVP offers a 0.5 percentage point higher yield (8.7 versus 8.2). Investment under the old KVP takes eight years and seven months to get doubled whereas in the new KVP, the doubling takes place in eight years and four months.