The KVP scheme, a secured option to park additional funds in, has an array of features and benefits.
Following describes the main benefits of KVP:
Assured returns: Those who invest in KVP will get guaranteed returns irrespective of market fluctuations. This encourages saving more.
Compounding interest: KVP's interest rates tend to vary, and they depend on the year the individual has invested. The rate of interest for the financial year 2020-2021 is 6.9%. The interest collected on the investment is compounded annually ensuring higher returns to the investor.
Tenure: The tenure of the Kisan Vikas Patra (KVP) scheme is 124 months. After tenure completes, the scheme matures and the KVP scheme holder receives a corpus. If the individual decides to withdraw the funds that have got generated later than the maturity period, the amount will accumulate interest until it's withdrawn.
Cost of Investment: The minimum amount required to invest in KVP is Rs. 1000 and there is no upper cap. However, the amount invested has to be in multiples of Rs. 1,000 and PAN details would be required if the sum is over Rs. 50,000.
Taxation method: The amount that gets withdrawn post maturity gets exempted from Tax Deducted at Source (TDS). However, do note that the KVP scheme isn't entitled to tax deductions mentioned under Section 80C.
Nomination: Under this scheme, one can easily transfer the KVP from one person to another as well as from one post office to another. They can also select a nominee of their choice. The nominee can be a minor, too
Loan against a certificate: A holder of Kisan Vikas Patra can avail a loan against the same. KVP certificate will act as the collateral while applying for a secured loan and that too at a lower interest rate.