Kisan Vikas Patra (KVP) in 10 points

1. Kisan Vikas Patra (KVP) is a saving scheme by Post Office whose goal is to double your investment on maturity. The time horizon required to double the money varies based on the interest rate set by government. Some banks also issues KVP.

2. For 2020, KVP doubles the income in 10 years 4 months (6.9% interest rate). Roughly, the maturity period varies from 6 years to 10 years. Hence, it is possible that you buy KVP in 2020 which will mature in 2030 and you buy another KVP in 2022 (9% interest rate) which also matures in 2030.

3. Any adult can invest in KVP and has to invest a minimum of Rs.1000 and then ahead in multiples of 100. It is a lump-sump one time investment.

4. KVP can be used as a collateral against loans in banks, corporates, NBFCs.

5. It is possible to quit the scheme before maturity only after 2.5 years. Otherwise it is not possible to withdraw the money invested.

6. KVP does not have tax deductions benefits under section 80C. Also, it is 1 time withdrawal and hence if the amount is large, the taxes will be imposed proportionately on gains. This is a disadvantage if there are other financial instruments with similar or higher returns.

7. The returns are guaranteed by government. It can be categorized as low risk saving scheme.

8. Documents : Address Proof (Aadhar, PAN, passport, driving license), Identity proof (Aadhar, PAN, passport), KYC form, KVP form.

9. Opinion : Though KVP guarantees doubling of money, it is a good choice only if the interest rates are higher (>9) . The investment will be locked-in for a long period of time and there are no tax deduction benefits like other saving scheme such as National Saving Certificate. Hence, it is not a good choice when interest rates are lower as there will be better alternatives available in the market. The only good thing about KVP is that the interest rate is fixed for compounding from day 0 till maturity.

10. It is very important to preserve the physical KVP certificate till the maturity. Else, it will create problem to withdraw invested money on maturity. The electronic version of KVP are also being launched recently.

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