We believe our government couldn't emphasize enough through advertising that you should not fall prey to schemes that commit unnatural returns. Frequently you would see K.L. Rahul or Jasprit Bumrah sensitizing you on this topic. However, there is one scheme that doubles your money. We are talking about a legit government-backed scheme called "Kisan Vikas Patra".
Kisan Vikas Patra (KVP) was launched in 1988, and it was open for farmers only in the initial years of the launch. However, later KVP was opened for the general public as well. This scheme guarantees a 200% return on your investment within a stipulated period of time, which depends on the interest applicable on KVP in the quarter you have purchased it.
In this blog, Fintra will explore various aspects of KVP such as the following topics:
Currently, KVP offers a 6.9% rate of interest. This means any investment made in KVP today, will double your money in 10 years and 5 months. Please note that the KVP interest rate is revised every quarter and this is the first time that rate has fallen below 7% because of the current economical situation pertaining to Covid-19. There was a time when investment used to double in 5 years as well.
Also, do note that once you have purchased a KVP at a particular rate of interest, it is going to be the same till maturity. It is only when you purchase a new certificate, newer rates at that time will apply. You can use this calculator to instantly calculate the returns and maturity period for your KVP.
In the initial years of investment, one may think of KVP as a one-time investment. So the idea of investing 25k in a year and getting 50k after 10 years may not be lucrative. However, we would request you to perceive KVP as a source of regular side income generator. For example, if you save 5k each month in a KVP, you would get 10k each month after 10 years. Now that is interesting, right? It is sort of a fixed-income instrument if used correctly.
If the government wants to curb liquidity in the market someday, it may very well increase the interest rates, too, which will make the doubling duration for you shorter. So, rather than a one-time investment, think of it as a passive income you will earn in the future.
The minimum investment for a KVP is Rs. 1000. Also, you can only invest in the multiples 1000, 5000, 10000, and 50000. If you plan to purchase a KVP of 78,000, you will have to purchase the following certificates:
If you are investing more than 50k in a KVP, you will have to produce your PAN Card. If the investment is more than 10L, ITR proofs will be required. Payment modes can be cheque, DD, and cash as well. KVPs are issued by post offices and national banks, and can only be redeemed from the issuing bank branch/PO on maturity. So chose wisely. All these certificates need to be stored physically and reproduced on maturity.
Taxes are real. One can end up in serious trouble if taxes are not accounted for while evaluating an investment instrument. KVPs are completely taxable. This means there are no reductions against KVP in Section 80C. Gains from the KVP are also taxable as per your income slab.
Kisan Vikas Patra can be redeemed early. Please refer to the table below to realize the returns at an investment of Rs. 1000
We believe KVP is a highly underrated tool. Being a low-risk investment it is a big hit amongst our previous generations. However, if leveraged properly, this can lead to a healthy wealth creation for each one of us. Apart from that, it can develop a much needed financial discipline and savings habit in you.