Kisan Vikas Patra (KVP) Interest Rate

Indian retail investors have been less aware of the newer money-making avenues in the market. Some conventional investment tools have attracted investors’ funds over the last few decades — real estate investment, government bonds, and saving certificates.

To date, risk-averse Indian investors prefer putting their money in savings certificates like Kisan Vikas Patra or KVP, which is an investment product from the Indian Post.

For those who do not know, Kisan Vikas Patra is a proven investment plan that has given good returns in the past, and with the current rate of 7.5% per year, it is still a viable investment option for all types of investors.

If you want to know more about Kisan Vikas Patra, read this article. Here, you will learn about the KVP scheme, its interest rate, eligibility, and value proposition.

What is Kisan Vikas Patra (KVP)?

The Indian Post introduced Kisan Vikas Patra (KVP), a saving certificate scheme, back in 1988 as a money-saving tool. The objective behind introducing such a product is to encourage Indian citizens to save money.

In the starting days, Kisan Vikas Patra was designed for Indian farmers. The government wanted to nudge the farmers to create a saving corpus over the years and secure their future. Generally, the KVP interest rate remains fixed for a pre-decided period. It promises to double the investment after the tenure. Currently, the tenure for KVP is 115 months.
 

A resident Indian can buy Kisan Vikas Patra with a minimum investment of ₹1,000, with no upper ceiling for the maximum investment amount. The investors need to deposit a minimum of ₹100 in the post office to open a KVP account to invest in the KVP scheme.

Types of KVP Certificates

There are three types of KVP Certificates:

• Single Holder Certificate - An eligible individual can buy this certificate for himself or on behalf of a minor.
• Joint ‘A’ Certificate - Two eligible individuals can buy this type of KVP Certificate, and the maturity amount is payable to both the holders jointly or any of the survivors.
• Joint ‘B’ Certificate - Two eligible individuals can buy this type of KVP Certificate, and the maturity amount is payable to either of the holders jointly or any of the survivors.

What is the KVP New Interest Rate?

The government reviews the KVP Interest rate every quarter, and the investment is compounded annually. The KVP new interest rate for the second quarter of FY 2023-24 is 7.5%, but it is subject to change as per the announcement made by the Finance Ministry of India.

At this Kisan Vikas Patra interest rate, the tenure has been fixed at 115 months to double the investment amount. Please note that the tenure can also change based on the interest rate.

How is KVP Interest Accrued?

The KVP calculation formula is:
 

A = P (1 + r/n) ^ (nt)

Here, A is maturity Amount, P is principal, R is Rate of Interest, t is Investment Tenure, and n is the Number of Times the Interest gets compounded.

So, at 7.5% interest, if you invest ₹10,000 in KVP, it will double after 115 months or 9 years 7 months.

KVP Interest Rate - 4 Years Historic Data

Here is a quick glance at how the KVP interest rate was revised over the last few years.

Who Can Buy Kisan Vikas Patra?

Any resident Indian above the age of 18 years can purchase Kisan Vikas Patra or KVP. An investor can purchase the KVP Certificate for self or on behalf of a minor(s). A trustee can also purchase a KVP certificate.
 

Non-Resident Indians (NRI) and Hindu Undivided Family (HUF) are not allowed to purchase KVP certificates.

Documents Required for Purchasing KVP Certificate

To invest in the KVP Scheme, the investor must fill out some documents and furnish them. Here is a list:

• The investor must fill out Form A and submit it to an India Post Office branch or specified banks.
• If the investment application is done through an agent, the investor/the agent must submit Form A1.
• The investor must furnish a PAN Card for investments above ₹50,000 in KVP Certificates.
• One must submit income proof for investments higher than ₹10 lakhs.

Features and Benefits of Kisan Vikas Patra

Kisan Vikas Patra's notable features:
 

• Guarantee of Return: KVP is a government savings scheme that promises to double the investment amount after the term.
• Capital Preservation: Since KVP has a fixed rate of interest and is not exposed to market volatility, investors’ funds remain safe and secure during the entire span.
• Ease of Investment: One can invest in KVP schemes by simply opening an account at a post office or a designated bank. One can start with their investment with as little as ₹1,000 and can go as high as they want. There is no capping on the upper limit for investment.
• Compounded Interest: Annual compounding of the KVP interest rate gets a better return at the end of the tenure. However, the return is fixed at double the investment amount.
• Fixed Tenure: At the current Kisan Vikas Patra interest rate of 7.5%, the maturity tenure is fixed at 115 months or 9 years 7 months.
• Take Loan Against KVP Certificate: Since KVP certificates are backed by the government, the investor can take secured loans against these certificates. However, the loan amount may depend on the capital invested in KVP.
  
  

Here, we should mention that the KVP maturity amount is not subject to TDS but is not tax* deductible under section 80C of the Income Tax* Act.

Should You Invest in Kisan Vikas Patra? — KVP vs FD vs NSC

Kisan Vikas Patra is a good investment tool for retail investors who want to earn some return while focusing on capital preservation. KVP schemes offer moderate returns with very low risk. Now, whether you want to invest in KVP schemes will depend largely on your requirements, risk appetite, and financial needs.

But before you take a call, it will be wise to weigh other similar investment options like Fixed Deposits (FD) and National Savings Certificates (NSC). Here is a comparison table pointing out several important features of each investment option:
 

Note: You can take housing loans against the KVP certificate and NSC certificate.
 

Choosing the right investment plan depends on your needs and financial situation. If you need liquidity, investing in KVP schemes may not offer you the freedom. Also, if you are looking for investment plans that offer tax benefits, the KVP scheme may not be your ideal investment option.

KVP schemes can be a great investment avenue for those who are unwilling to risk their capital investment and yet desire a guaranteed return.

Conclusion

After being discontinued in 2011, the government re-introduced the Kisan Vikas Patra scheme in 2014. It is a great investment tool that offers guaranteed¹ returns at minimum risk. The current KVP interest rate of 7.5% can double your investment in 115 months.