Kisan Vikas Patra (KVP)

"Kisan Vikas Patra (KVP)" or "Farmer's Development Letter" is a saving certificate which was first launched in 1988. It was successful in the early months but afterwards the Government of India set up a committee under supervision of Shayamla Gopinath which gave its recommendation to the Government that KVP could be misused. Hence the Government of India decided to close this scheme and KVP was closed in 2011.

However the new Government formed in 2014 decided to relaunch this scheme following which the scheme was relaunched in 2014.

"In the last 2-3 years, savings rate in country has declined from a record high of 36.8 per cent to below 30 per cent due to slowdown in the economy. It is, therefore, necessary to encourage people to save more," Finance Minister Arun Jaitley said during the launch of the revamped KVP.

The “Kisan” in Kisan Vikas Patra does not mean that only farmers can buy these saving certificates but means that the revenue mobilized by this scheme will be used by the Government of India in welfare schemes for farmers. Any individual can safely invest and save their money in the form of Kisan Vikas Patra.

Features of KVP:

KVP-2014: Salient Features 

1. Launched under Government Savings Certificates Act 1959.
2. Awareness Agency: National Savings institute, Department of Economic Affairs in Finance ministry.
3. At present, only sold via Post offices. Later, nationalized banks will be permitted to sell KVP as well.
4. KVP are available in the Denomination of Rs. 1000, 5000, 10,000 and 50,000.
5. There is no Upper Ceiling on Investment. You may invest as much as you want.
6. KVP will double your invested money in 100 Months (8 years and 4 months.)
7. If you want to pullout money before 100 months, you can do so after
   1. 30 months =2 years and 6 months OR
   2. Subsequent blocks of 6 months.
   3. For more, refer to appendix.
8. KVP certificate can be purchase in single individual name or in joint names. Need to submit ID proof and residence proof.
9. KVP can be bought using cash, cheque, demand draft BUT
   1. If Rs.50,000 or more invested, then PAN card copy is must.
   2. If Rs.10 lakh invested, client will have to give additional proof of income.
10. Adult can buy it on behalf of minors. But such certificate can’t be transferred to others as long as minor is alive.
11. Nomination facility available i.e. if I die, handover the money to xyz person.
12. KVP certificate can transferred to others via post office, for multiple times.
13. But to prevent money laundering, during every transfer, both certificate-giver and taker, will have to sign form in the post office along with photocopies of following, under KYC norms (Know your customer)
    1. ID proof
    2. Resident proof
    3. PAN card (if more than Rs.50,000 invested) as per KYC norms. .
14. If Certificate is destroyed/lost, client and get a duplicate copy BUT has to submit identity proofs. Therefore, again money laundering difficult.
15. Post-master can transfer the KVP certificate from an individual to President and governor, RBI, Banks, cooperative society, PSU, Government companies, Housing finance companies and even local Panchayat and municipalities.
16. Above feature is designed, to help the client use KVP as “security deposit” e.g.
    1. While taking loan from banks, cooperative societies or even housing finance companies.
    2. As Deposit for contesting elections.
    3. As “bond money” for certain jobs, such as the fabled ACIO, some PSU-jobs etc.
17. Tax liabilities
1. Interest earned from Kisan Vikas Patra, is taxable.
2. If you gift KVP-certificate to someone, then he’ll have to pay gift-tax to Government.

How to Invest in KVP?

Kisan Vikas Patra can be purchased from any Post Office by filling a form and depositing the amount in cash or by cheques or demand drafts with the filed form and your photographs. The Post Office will issue a Certificate called Kisan Vikas Patra with your name, amount, date of maturity and amount on the date of maturity. 

Who Can Invest in KVP?

You can invest in Kisan Vikas Patra

• If you are a citizen of India and an adult; in your own name, or on behalf of a minor. 
• A trust is also eligible to invest in KVP. 
• Two adults can jointly buy KVP.

Who Are Not Eligible?

Kisan Vikas Patra is not for business entities such as a company or institutions. NRIs or HUF (Hindu Undivided Family) are also not eligible to invest in KVP.

Kisan Vikas Patra VS Other Saving Schemes:

 However, bank deposits,  are offering better rates than the KVPs. Small private banks, such as Lakshmi Vilas Bank, Karnataka Bank and a few PSU banks, are offering up to 9% on fixed deposits of 8-10 years. However, there are other advantages like greater liquidity and ease of investment.

How Kisan Vikas Patra score high compared to other small saving schemes? 

• Investors can invest in this safe investment scheme instead of investing in some Ponzi schemes. 
• These KVP’s offer higher liquidity to investors who can sell them after 2.5 Years. National Saving Certificates (NSC) on the other hand have 5 year maturity period. PPF has 15 year maturity period. 
• Kisan Vikas Patra comes with attractive interest rate of 8.7% per annum. NSC Offers 8.5% and Post Office Term deposit offers 8.4% interest rates. PPF on the other hand, offers 8.75%, however, this would get changed every year. 
• You can invest any amount in Kisan Vikas Patra. You can gift such KVP’s to minor children, friends and relatives. However, it would attract gift tax for them. 
• You can transfer such KVP’s from one post office to another. Currently, if you buy NSC from one post office, it would be difficult if you transfer or move to another city.