The Kisan Vikas Patra [KVPs] was a popular and safe small savings instrument that doubles the invested money in 8 years and months. This scheme was backed by the government, which was discontinued by the government from 1 December’2011. However, existing investor in this scheme will continue to enjoy the earlier stated benefits.
Capital Protection:
The capital in the KVP was completely protected as the scheme was backed by the government of India, making it risk-free with guaranteed risk-free with guaranteed returns.
Inflation Protection:
The KVP was not inflation protected, which means whenever inflation was above the current guaranteed interest rate f 8.4%; the deposit earned no real returns. However, when inflation rate was under 8.4%, it did manage a positive real rate return.
Guarantees:
The interest rate in the KVP was guaranteed and was 8.4% compounded yearly at the time of discontinuation.
Liquidity:
The KVP had liquidity, despite the 8 years and 7 Months that it look to double the deposit. The liquidity was offered in the form of loans and with drawls subject to conditions. One could pledge the KVP to take a loan from any bank or financial institution.
|
Liquidity on premature withdrawal |
Percentage of Face Value [%] |
Amount Paid on Rs. 1,000/- on Face Value [Rs] |
| 2 years 6 months or more but less than 3 years |
1.05 |
1,170.51 |
| 3 years more but less than 3 years 6 months |
20.79 |
1,207.95 |
| 3 years 6 months or more but less than 4 years |
26.71 |
1,267.19 |
| 4 years or more but less than 4 years 6 months |
31.08 |
1,310.80 |
| 4 years 6 months or more but less than 5 years |
35.39 |
1,355.90 |
| 5 years or more but less than 5 years 6 months |
43.56 |
1,435.83 |
| 5 years 6 months or more but less than 6 years |
48.84 |
1,488.49 |
| 6 years or more but less than 6 years 6 months |
54.33 |
1,54.30 |
| 6 years 6 months or more but less than 7 years |
64.91 |
1,649.13 |
| 7 years or more but less than 7 years 6 months |
71.38 |
1,731.82 |
| 7 years 6 months or more but less than 8 years |
78.10 |
1,781.06 |
| 8 years or more but less than 8 years 7 months |
85.09 |
1,850.93 |
Credit Rating:
As the KVP was backed by the government of India, it did not require any commercial rating. This holds good for existing investors as well.
Exit Option:
Premature withdrawal is permitted at a cost for existing investor.
Other Risks:
There is no risk associated with this investment at a cost for existing investors.
Tax Implications:
For existing investors there is no tax benefit on the deposit or the interest that it earns. The yearly interest accrued in the KVP is taken as “Income from other sources” to compute income tax. However, there is no TDS deducted.
Where to Buy:
- Once you decided on the sum to invest
- You had to fill the KVP application form available at the post office.
- Original identity proof for verification at the time of buying was required.
- You could buy the certificate with cash, cheque or demand draft drawn in favour of the post master of the post office from where the KVP was being bought.
- You had to choose a nominee and get a witness signature to compete the formalities when buying this product.
Points to Ponder:
- The KVP can be encashed at any post office in India provided one has obtained transfer of the certificate to the desired post office for existing investors in this instrument.
- KVPs are transferable across post offices for existing investors.
- Interest income is taxable but no TDS certificate issued.
Features:
ELIGIBILITY
One had to be a resident Indian to purchase this product.
ENTRY AGE
- No age limit was mentioned
- A minor above age 10 years could open account on their own name directly
MINIMUM INVESTMENT [Rs]
- Minimum: Rs. 1,000/-
- Maximum: There was no upper limit
- Certificates were available in denominations Rs. 100, Rs. 500, Rs. 1,000, Rs. 5,000, Rs. 10,000 and Rs. 50,000
INTEREST
- 8. % compounded yearly
TENURE
- 8 Years and 7 Months
OTHER ASPECTS
- Premature encashment allowed for existing investors
- Rs. 100 would be double upto Rs. 200 in 8 years 7 months
ACCOUNT HOLDING
- Individual
- Joint
- Minor through guardian
NOMINATION
- Facility is available for existing investors