Introduced in 1998 by the India Post, the Kisan Vikas Patra is a small savings certificate scheme. The scheme helps inculcate long-term financial discipline amongst investors. The tenure of the scheme is 124 months, which is 10 years and four months.
The minimum amount to be deposited is ₹1,000, while there is no cap on the maximum limit. Initially, this scheme was meant only for farmers (kisan) but it is now available for the public at large.
Opening an account
Any Indian citizen aged 18 or above can avail this scheme. An adult can avail it on behalf of a minor. In order to enrol, you will have to fill in Form-A along with identity proof to complete the Know-Your-Customer (KYC) process.
It is a government-run scheme along with multiple benefits. It is highly recommended to investors with a low-risk appetite. There are three types of certificates that are issued under this scheme:
Single Holder Type Certificate: It is issued to an adult for self or on behalf of a minor or to a minor.
Joint ‘A’ Type Certificate: It is issued jointly to two adults and is payable to both the holders jointly or to the survivor.
Joint ‘B’ Type Certificate: It is issued jointly to two adults and is payable to either of the holders or to the survivor.
Rate of interest
The present rate of interest for this scheme is 6.9% after a maturity period of 124 months. If your money is locked in for this period, it will stand to get doubled. Apart from being a safe mode of investment without market risks, the interest rate is compounded annually which enables the depositor to reap higher benefits.
Tax exemptions
It is important to note that this scheme does not come under Section 80C tax deductions. However, once the maturity period is complete, TDS is exempted from the amount that is withdrawn.
The scheme does not allow premature withdrawal except at the demise of the account holder or on the order of the court. The KVP can also be utilised as collateral to avail of a loan facility.
It is a good investment option for those who want to make a small, risk-free investment over a long period of time to earn a decent rate of interest. However, one must remember that this small savings scheme is not eligible to avail tax deductions.
