What is Kisan Vikas Patra?

 

Kisan Vikas Patra is a small saving scheme with the post office that doubles the invested amount over a period of time. The tenure depends on the applicable rate of interest that is subject to revision by the government every quarter.

 

In other terms, it is a fixed deposit that matures with a fixed amount and the money gets doubled over a period of time.

 

How does it work?

 

Step 1: You deposit a certain amount of money

 

Step 2: The interest rate that is applicable on that day is locked for the entire tenure.

 

Step 3: Interest is calculated by the government and added to the initial amount of the investment every year.

 

Step 4: On maturity, you get back double what you invested initially.

 

Interest Rate :

 

The Interest offered by KVP is 7.2% if invested between January and March 2023. The rates are revised or kept unchanged after reviewing every quarter.

 

The Interest is however taxable in the hands of investors. The interest is straight away added to the income of investors. If an investor is in a 30% tax bracket the net yield after tax comes to 5.04 per cent. Hence it is not advisable for investors in such high bracket to invest in this product.

 

Taxation:

 

The interest income from KVP is added to investors' income and taxed according to the tax slab. As explained earlier investors in high tax brackets will have to bear higher taxes on their interest income. However, the deposits are exempt from Tax Deduction at Source (TDS) at the time of withdrawal.

 

Lock-in Period :

 

KVP do provide premature withdrawal. It has a lock-in of two and half years i.e. 30 months. After 30 months if an investor wants to make a premature withdrawal, he can do that.

 

What happens in case of death?

 

In case of the death of the investor, the investment along with accumulated interest is paid to the nominee or the legal heir.

 

How does one start investing in KVP?

 

One can visit their nearby post office and start their investment in KVP. One form needs to be signed and a KYC document needs to be submitted along with the initial investment payment. KYC documents will include one recent photograph, Pan card copy, Aadhaar Card copy, Passport or Driving License

 

Suitability :

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Kisan Vikas Patra as an investment is suitable for investors who don’t want to take risks on their investments. Only risk-averse investors should opt for this investment. If you are looking for long-term one can always look at other investment options available like Fixed Deposits, RBI Floating Rate Bonds and Corporate Fixed Deposits.

 

Also, for the long term one should take some risks and invest in Equity Mutual Funds and make better returns on their investment.