Indira Vikas Patra: high interest, highest safety

Indira Vikas Patra, initiated by the Indian government, encourages small investments. The scheme was initially meant for farmers, hence the name Kisan Vikas Patra (KVP). Later on, this investment became open to all. 

Over time, the term Kisan Vikas Patra has been used predominantly over Indira Vikas Patra. To increase user understanding of the scheme, the term KVP will be used in the article. This article will cover its eligibility, types, interest rates, features, and benefits.

Know who can invest and how

What is Indira Vikas Patra or Kisan Vikas Patra or KVP?

Kisan Vikas Patra (KVP) is a small tax saving deposit scheme for inculcating a savings habit amongst rural people. Launched in 1988, it promises returns of double the amount invested in a specified period. 

Presently, that period is 124 months or ten years and four months, if initiated in quarter 1 of FY21. Open to all investors, the scheme helps to keep surplus money in a safe investment. The applicable interest rate is 6.9% per annum, compounded annually by the government.

Who May Invest in KVP?

The Indian government backs the scheme. Hence, it ensures safe investment for risk-averse investors in rural and urban areas. Being a long-term investment scheme, it suits long-term financial goals. Thereby, they keep earning risk-free returns on investment.

How to Invest in KVP?

Individuals may open a KVP account with registered bank or post office accounts. For the scheme enrollment, investors may directly fill up form A from a bank or post office.

Likewise, the investors may download and fill up from online bank or post office websites. Upon filling it, they can submit it to their nearest registered providers. Documents necessary for this are-

  • Passport-size photograph.
  • ID proof, Address proof.
  • Income proof for investments of INR 10 lacs and above.
  • PAN card details for investments of INR 50,000 and above.

Eligibility Criteria for KVP

  • The investor must be an Indian resident of age 18 years and above.
  • Parents or guardians may invest on behalf of minors or disabled individuals.
  • No NRIs and HUFs are eligible for this scheme.

Types of KVP accounts

Primarily, three types of KVP investment accounts are available. 

  • A single account: Issued to an adult for self or on behalf of any minor.
  • Joint A account: This account can be issued jointly with a maximum of 3 adult members. All holders are entitled to receive the maturity amount.
  • Joint B account: Jointly issued with a maximum of 3 adult members. However, a single holder or survivor receives the matured amount.

Core Features and Benefits of KVP

  • Any Indian resident aged 18 years and above can open a KVP account. Up to 3 members may hold a joint KVP account, given they have registered post office or bank accounts.
  • An individual can make a single high-interest deposit on a KVP account. The minimum amount for investment is INR 1000, with no upper investment limits. 
  • To prevent money laundering activities, investments above INR 50,000 require PAN card details of the investor. Investments above INR 10 lacs require income source disclosures.
  • Investments made in the June quarter at 6.9% are compounded annually. The design doubles the returns upon completing 124 months. If no withdrawal occurs, the post office accrues. The maturity period is, however, subject to revisions. 
  • The fixed deposit for a senior citizen or a salaried or self-employed individual is not eligible for tax deductions under Section 80C. 
  • Easy transfer from one post office branch to another or an individual registered bank. The account is transferable under specified conditions. The users can fill up form B for a transfer request.
  • For premature withdrawal, here are the rules:
  • Withdrawal within a year will offer no interest on returns, following the payability of an additional penalty amount.
  • For withdrawals within 2,5 years, there are low-interest calculations with no penalties.
  • Withdrawals after 2.5 years will not cut any interest or penalty.
  • Individuals may nominate a family member by filing Form C and providing necessary documents. The account holders may cancel or make nominee variations by filling form D.

To conclude
No tax exemptions are possible with the KVP scheme. However, the returns on investment are double the original deposit. This is what makes this government scheme popular among rural people. Not only does it save money, but it also helps users to get eligible loans against a KVP account. Now that you know about KVP, it’s time to invest wisely for a better future.

How to start investing – Chapter 1 – popular Bank deposits

Wish you all a very Happy New Year. Am sure you all have had a good party and a host of new year resolutions. I am eager to share mine. With full of excitement and commitment, I would like to make the topic ‘finance’ easier, and help you become wiser to check on your financial health and get better. The first of the year, I am dedicated to understand what are the simple things you need to do to begin the process of investments.
To begin, needless to say you may consider the following things for smooth execution.
Also read – Smart ULIP
Online Banking – Very customer friendly process, you can start online banking just using your debit card. You can go to the bank website and choose net banking/ Online banking option. You will be guided with the process, if you don’t have the pin handy, you can generate one easily, following the instruction.
Bank account – For easy tracking and smooth transaction, I follow one account for last 8 years or so, be it mutual Funds, insurance or paying credit card bills, it also helps in maintain records
Lets start with the most traditional investments, Bank deposit.
Savings account – This is the default savings/ deposit option for any individual with a savings bank account. The cash lying in the account earn a nominal 3 to 4 percent interest per year. Though I highly recommend Liquid Mutual Funds over savings account, still it is an available default option. 
Fixed Deposit – Though I am a fan of debt mutual funds and am aware that fixed deposit cant give an inflation adjusted return, I can’t deny the fact that some of my money stays in the bank account and in the form of fixed deposits. If you already have online banking, you just need to tap on the deposits tab and you will be guided with a small 30 seconds process wherein you have to key-in basic details like – the amount, branch you choose for the deposit (this comes handy if you are depositing a large sum of money, for which you may need to visit the branch for pre-matured withdrawal). The amount you choose for the fixed deposit must be lesser than or equal to your savings bank account. You need to check the interest rates, as it varies for different tenures and then chose the term for which you wish to block the sum and interest payout instruction – Monthly/ quarterly, annually or maturity. You may also need to fill in the details like what you want to do with the maturity proceed, you may choose to get the proceed credited into your account or you can choose reinvestment option (personally, I dont like this option). Do remember to keep you PAN card  handy incase you are depositing a sum above 50,000 rupees. 
One can have multiple fixed deposit parallely with different combination of amount, term and interest rates at the same time. Minimum amount could be Rs. 1000/ 5000/ 10,000 depending on the bank you are operating in.  Choosing a nominee is advisable for a large fixed deposit, its available in online deposit window. 
Recurring Deposit – Another traditional Deposit named as Reccurring deposit is somewhat a precursor to the SIP of mutual Funds. Similar to the fixed deposit option, you need to click the deposit option, choose the tenure (mostly year and multiple of years or 6 months). In this  deposit scheme, you need to choose a fixed sum of money to be added to your kitty every month and the interest is accumulated on pro-rata basis. This is a good option to create an emergency fund or accumulating wealth in 1-2 years times span.
Advantage of Deposits 
1. It is the most liquid investment
2. It can be used as an emergency corpus
3. It gives fixed interest / return on the investment
3. One can take a loan against the deposit, most accepted collaterals by Banks 
Cons 
1. Bad vehicle for medium to long term wealth creation
2. Doesn’t have any potential for upside/ variable return
3. Fixeddeposits are insured upto 1 lakh Rupee. Money above 1 lakh is not risk free, so incase the bank goes bust, they will not have any liability over 1 lakh Rupee
4. The interest earned on the deposits are taxed basis the individual’s tax bracket
Adios for today. Will come back to you with guidance on how simply one can buy mutual funds, life insurance, ULIP, health insurance, PPF, NSC etc.
Stay healthy, stay fit, and be money wise!
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