Types of Savings and Investment
Kisan Vikas Patra
The next savings scheme that we will discuss is offered by all the post offices across the country.
The Kisan Vikas Patra (KVP) is a safe small-savings instrument that doubles the invested money in 112 months. Minimum amount to be invested is ₹1000 and there is no cap on the upper limit of deposit. There is a lock-in period of 30 months. Encashment is allowed after 30 months by paying a penalty.
How to Apply for Kisan Vikas Patra?
The following documents are required to apply for Kisan Vikas Patra:
- Duly filled Application form.
- Identity proof like PAN card, Passport.
- Address proof such as Telephone bill, Aadhaar card.
- Age Proof Document like a Passport, Senior Citizen Card, a Birth certificate issued by Corporation or registrar of births and death, Voter ID card, PAN card etc.
- 2 Passport size photographs.
This certificate can be bought from post offices and some nationalised banks. It is not necessary to have a savings account in the same Financial Institution where the Certificate is being bought from.
Interest Rate Mechanism
For Kisan Vikas Patra, the interest rate is 7.7% p.a compounded annually. The interest rate is linked to G-Sec rates. The Government reviews the interest rates quarterly but, once invested, the interest rate prevailing at the time of investment would hold till maturity.
There is no tax exemption on the principal amount or the interest.
Risk associated with Kisan Vikas Patra
There is no risk involved as this scheme is backed by the Government of India. Principal and Interest are guaranteed. If inflation turns out to be higher than the nominal interest rate of the investment, there would be no real returns available. Hence, it is not inflation protected.