Kisan Vikas Patra - An Investment Scheme for All

Kisan Vikas Patra Or, KVP, in short, is the latest ‘savings’ instrument that is making the news.

No, it’s not a savings scheme for farmers! Instead, it means that the invested amount will be used for the welfare programs aimed at the farmers of the country.
Kisan vikas patra

So you and I can invest – and it will be used in the nation-building activities specifically involving agricultural sector and the farmers! SO it is GOOD!


KVP is not an original idea though – KVP had been first launched in 1988 – and ran for 23 years before being discontinued in 2011.  As Kisan Vikas Para is a negotiable instrument and PAN card was not required for making an investment in KVP, it led to money laundering. That's why Kisan Vikas Patra scheme was discontinued.

What's new in Kisan Vikas Patra 2014

Now it mandatory PAN Card proof for investments over Rs.50,000 and income source proof for investments exceeding Rs.10 lakh.

Back in July 2014, the new Finance Minister Arun Jaitley gave us a peek at what was to come and mentioned his intention to re-introduce KVP.

The revamped version – one can say – a cog in the wheel of the current PM’s nation-building and mass participation vision – was launched (or re-launched) on 24/ 25 November 2014.

And as is expected it’s got many pros and some cons which gives the pundits to laud or trash it! But our job is to objectively look at the features of this instrument and prepare for interviews – get a job – get the salaries and then think about investing in KVP!

So what is KVP?

It is small savings scheme – by the Government of India – run by The Directorate of Small Savings – and the Post Offices sell these saving bonds.

Post Offices in India have a very wide network, spread all over the country – and hence it makes sense to sell KVPs through the Post Offices as the public will have easy access.

It is just like an FD – and the instrument just like FDR is a physical instrument – a certificate named ‘Kisan Vikas Patra’ – which will have the rate of interest, maturity tenure, name of the investor etc. printed on it.

Features of KVP – a bird's eye view:

  • The top draw – the invested amount doubles upon maturity! Yeah! 
  • And the interest is 8.7%. Which is higher than most savings instruments. 
  • The maturity period is 100 months or eight years and four months – that is like way too long!
  • But nation-building is a long process! 
  • Plus there is a lock-in period of 2 years and 6 months – that is during this period en-cashing is not allowed; thus KVP can be redeemed after 30 months and then after every 6 months hence. 
  • You being a citizen of India, adult or a trust can invest – you can also invest on behalf of a minor. Two adults can also jointly buy a KVP. 
  • But if you are a company, a firm, a HUF or an NRI – you cannot invest. 
  • Now, the certificates are available for fixed amounts – Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000. So every lot/ certificate unit is of these denominations. 
  • No cap on the maximum amount you want to invest. Minimum is Rs.1000. 
  • It is a bearer instrument and easily en-cashable and nomination facility is available too. 
  • And it can also be used as security to avail bank loans!
  • PAN is not required for KVP; but identity and address proof is required – so DL, VID etc. should work. 
  • KVP will be issued after conforming to KYC norms – this is in order to ensure black money does not get turned into white money!

Tax treatment of Kisan Vikas Patra (Bad thing about KVP) …

  • KVP interest on maturity is fully taxable. Yep. So in the year, the KVP matures the entire interest amount will be added up to your income and accordingly taxed. 
  • So if you are the in higher bracket of the tax slab – you pay a tax at that higher rate on the interest income too! 
  • As for the investment amount (principal) itself – you do not get any tax deduction under section 80C. So that is a double blow. No tax benefits whatsoever!

Thus, KVP is really aimed at the mid alow-income groups (they also have the benefit of being under the tax slab or lower brackets) to encourage savings and to mobilize savings in constructive activities.

It’s just been exactly a month since its re-launch and it has a long way to go for success – because 1990s and 2014 is a lot different in terms of economic conditions of the country and the saving habits of people – and there are better investment options available now.

But KVPs intention is good – so here’s wishing KVP all the very best !

Good day!
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21 comments:

  1. sir plz upload marketing digest for sbi associate clerk clerk exam...

    ReplyDelete
  2. can we draw kvp before maturity,?are charge to with raw bfore meturity?..then what is the difference between fd and kvp

    ReplyDelete
  3. Raman Sir IBPS PO ke interview me character certificate to nhi chahiye na sir, jaise SBI me bol rha tha ???

    ReplyDelete
  4. sample answer for interview question

    Can you work under pressure?

    guys help me to answer such question....
    1.If an interviewer ask this
    question definitely what I'm saying is I can do work in pressure also because
    in that period if we get achievements those are helpful in my career if I
    defeat those are help to achieve success, and this is also show our patience
    and positive attitude. Thank you.

    2.I can't do work properly in
    pressure. Yes, I can do work in pressure but in a limited pressure. Because
    under some pressure the performance will increased but after some it's graph
    decreases. If I'll be free I can think more innovative idea's.

    ReplyDelete
  5. Min duration is 30 months, You can withdraw after this period only. Just like FD.

    ReplyDelete
  6. Sardaar jee, you are doing great work on it and thanks for the same

    ReplyDelete
  7. Nice article Raman sir....kash yeh article kuch din pahle milta.....insurance wala xam me 4 questions tha from KVP

    ReplyDelete
  8. Please provide us a short lecture on Nobel prize history and the recent winners of it

    ReplyDelete
  9. Which day u appeared in xam??

    ReplyDelete
  10. solid language understanding language thnx sir ji

    ReplyDelete
  11. madhya pradesh general cut off marks any body can share

    ReplyDelete
  12. on which day ur exam was?

    ReplyDelete
  13. Sir what is the final cutoff for allotment?
    As for gen in written test- 82/200, what would be the approx marks for interview out of 100?
    Since the marks are calculated in 80:20 i.e. 80 made out of 200 and 20 out of 100.

    ReplyDelete
  14. Sir my score in ibps po 4 is 83 in general category and my interview marks may be in between 60 to 70 what is the selection chances please tell me

    ReplyDelete
  15. I have Got 121 In Unreserved Category.. Interview was Normal I have Ans 80% Question.. What About My Chances

    ReplyDelete
  16. Sir,

    Please suggest me best book for Food corporation Exams.

    ReplyDelete
  17. Hi Ramandeep...mai up se hu ..gen cat and ibps po me 92 and clerk me 134 h..kisi me hoga ki nhi...?

    ReplyDelete
  18. StrugGle to SUrvivEJuly 14, 2015 at 12:40 PM

    THANK YOU SIR:)
    ONE QUERY :-
    Plus there is a lock in period of 2 years and 6 months – that is during this period en-cashing is not allowed; thus KVP can be redeemed after 30 months and then after every 6 months hence.

    what does it mean sir?

    ReplyDelete

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