Monday , April 23 2018

Kisan Vikas Patra (KVP) India Post

Kisan Vikas Patra (KVP) India Post

Of numerous small savings vehicles introduced by Government India from time to time, Kisan Vikas Patra is one of them. The scheme came into existence in year 1998 and continued till December 2011. However, the current BJP government reintroduced the scheme in year 2014 after making a few amendments to the scheme.

The reason why the scheme was pulled off market was that many government official argued that it is a tool that can be used for the purpose of money laundering. Later when the scheme was reintroduced into market, it was made mandatory that people opting for this scheme needs to provide a PAN if the investment amount exceeds INR 50,000. In addition, if any one invest more than INR 10 lakh, he or she has to provide the proof for income source.

Kisan Vikas Patra (KVP) India Post

What was the purpose of introduction of Kisan Vikas Patra?

This scheme was designed to counter the threat of Ponzi schemes that looted rural and semi-urban people in name of investment. The scheme was introduced with some unique promises:

  • Doubling the money in 100 months which translates into 8 years and 4 months.
  • Investors in India (irrespective of caste, religion or place of stay), that is Indians in general could invest in this scheme.
  • An investor would be issued a certificate known as KVP certificate. The certificate would be issued by Small Savings Directorate through post offices in India.
  • The certificate can be held jointly or an individual can hold it or it can be held in name of a minor (one who hasn’t attained the age of 18 years)

Initially, Kisan Vikas Patra offered an interest rate of 8.7%, which was pretty high. It became quickly popular among people. However, after its reintroduction in market, the interest rate was cut down to 7.8% during Union Budget of year 2016. The new rate became applicable from Fiscal Year 2016-2017.

What are the eligibility conditions for Kisan Vikas Patra?

The eligibility conditions for Kisan Vikas Patra are simple and straightforward. They are mentioned below:

  • An investor needs to be an adult in order to invest in Kisan Vikas Patra.
  • Investments can be made on behalf of a minor by an adult.
  • In order to invest in this scheme, one has to be a resident of India and must have Indian nationality.
  • NRIs cannot invest in Kisan Vikas Patra.
  • Hindu Undivided Families or HUFs are not eligible for this investment scheme.

Benefits of Kisan Vikas Patra (KVP)

Kisan Vikas Patra comes with some incredible benefits which are mentioned below:

Multiple choices One can make investments depending upon the financial strength of an individual. The lowest denomination of a KVP certificate is Rs. 1000 while the highest denomination is Rs. 50,000.
Doubling promise KVP comes with a promise of doubling the investment amount in 8 years and 4 months.
Inflation safe The scheme offers fixed interest rate and hence, inflation has no impact on the scheme.
No ceiling There is no ceiling on the investment about. A person can invest as much as he or she wants.
Certificate as collateral A person can actually use the KVP certificate as a collateral against any loan like house mortgage.
Low lock in period KVP has just 30 months lock in period. That is, KVP cannot be withdrawn before 2 years and 6 months.
Transferable KVP certificate can change ownership. This transfer of ownership can take place only when a few predefined conditions have been fulfilled. Also, post office approval will be required for such transfer.
Tax benefits Income earned by KVP is taxable.
Maturity amount is not taxable.
TDS or tax deducted at source is not applicable.

Maturity Rules of Kisan Vikas Patra

It is plain and simple. At the end of 100 months from the date of purchase of a Kisan Vikas Patra certificate, the invested amount get doubled. 100 months means 8 years and 4 months. So, if you invest Rs. 1 lakh today, after 8 years and 4 months, you will get Rs. 2 lakhs. This is a guarantee provided by the scheme.

Encashment and Premature Encashment Rules for Kisan Vikas Patra

Encashment rules: If you wish to encash your KVP certificate, you will have two options:

  • Encash it from the post office from where you purchased it.
  • Encash it from a different post office.

If you are encashing your KVP from the same post office from where you purchased it, you have to give a written application along with your identity slip that you obtained when you purchased the KVP.

If you are encashing your KVP from a different post office, you will still have to give a written application as well as the identity slip. However, there will be a few additional formalities that you will have to fulfill.

Premature Encashment rules: If you are looking to encash your KVP certificate before the maturity date, you can always do so. However, you need to keep in mind that you cannot encash it before 30 month (which is the lock in period).

Apart from you simply wanting to prematurely encash the KVP, a KVP certificate can also be prematurely encashed if:

  • If the court gives an order to do so.
  • If the KVP is forfeited by a Gazetted officer or because of a pledge.
  • In case of joint ownership, if one of the joint holder dies, the other holder can have it encashed prematurely.

Guidelines and Rules for Kisan Vikas Patra

KVP was withdrawn back in 2011. However, it was once again introduced in 2014. So, all the rules and guidelines that are applicable are from 2014. Previous rules and guidelines do not hold (unless they have been retained in the new set of guidelines and rules). Let us take a quick look at the guidelines and rules that are applicable however, before we start, here are a few things you should remember:

  • All rules are known as ‘Kisan Vikas Patra Rules, 2014’.
  • Any rule which gets published in what is known as Official Gazette, will become effective as soon as it is published.
  • Act in context of Kisan Vikas Patra will mean Government Savings Certificate Act of 1959.
  • Cash in context of KVP will always refer to Indian currency (that is Indian Rupee) cash.
  • Certificate in context of KVP rules will always refer to KVP certificate.
  • Form in context of KVP will always refer to form which has been annexed to KVP rules.
  • Post Office in context of KVP will always refer to an Indian Post Office which undertakes the work of a Savings bank.
  • Identity slip in context of KVP will always refer to the slip that is handed over to the purchaser of KVP certificate by the post office.

Now let us take a look at the rules:

  1. Certificate denominations allowed: There are only four denominations: Rs. 1K, Rs. 5K, Rs. 10K and Rs. 50K.
  2. Same application process: The process for application of KVP is exactly the same as the application process for Post Office Savings Certificate Rules of 1960.
  3. Number of certificates allowed: There is no upper cap to this. A person can purchase as many certificates as he or she wants.
  4. Certificate types allowed: There are only three types of certificates that are allowed. They are:
  1. Single Holder Certificate: This certificate will be issued only to an individual adult. The certificate can be for the adult himself or herself or it can be for any minor for whom the adult is purchasing the certificate.
  2. Type A Joint Certificate: In this case, two adults will hold the certificate and the maturity amount will be paid out jointly to both of them or to one of the survivors if the other person dies.
  3. Type B Joint Certificate: In this case, two adults will hold the certificate and the maturity amount will be paid out to only one of the two holders. It has to be predetermined which holder will get the maturity amount. However, in case of death of one of the holders, the other holder will get the amount. Here the rule of predetermined beneficiary will cease to exist because it may so happen that the beneficiary himself or herself died.
  1. Time for issuing certificate: As soon as the purchaser makes the payment, the certificate is issued. This means that the date of issuing certificate is same as date of making the payment. However, it may happen that for some reason, the certificate may not be issued immediately. In such a scenario, a provisional receipt is given out to the purchaser. Later when the certificate becomes available, the receipt is exchanged for the certificate and the certificate will have the same date as the date of payment.
  2. Certificate purchase procedure: In order to purchase the certificate, the purchaser needs to be present physically and has to submit the form. Payment can be in form of cash, DD, cheque or signed withdrawal form.
  3. Transferring the certificate: It can be easily transferred from one person to another. For that to happen, the existing owner needs to provide a written application to Postmaster. Transfer is allowed under these cases:
  1. If the owner dies, it can be transferred to a legal heir.
  2. If the owner wants to convert it form single owner to joint holder.
  3. From the holder to court or to a person who has orders from court to get the certificate.
  1. Certificate pledging: In Form B of application by transferee and transferor, the Postmaster has the authority to transfer the certificate at any point in time as a security to:
  1. Governor of State.
  2. Reserve Bank of India.
  3. President of India.
  4. Scheduled Bank.
  5. Cooperative Society which has a cooperative bank.
  6. A corporation or any government agency.
  7. India’s Central Government notified and National Housing Bank approved Housing Finance Company.
  8. To any local authority. However, if the certificate is in name of a minor, a transfer on behalf of a minor will not be allowed.
  1. Nomination: Nomination is allowed for both single and joint ownership of a certificate. In case of death of the owner, the nominee will hold the certificate or will get the withdrawal amount.
  2. Post maturity interest: If the amount is not withdrawn after the certificate matures, it will keep earning interests with following conditions:
  1. Only simple interest will be calculated after maturity.
  2. Interest will change as and when the interest of Post Office Savings Account changes.
  3. If the certificate holder decides to withdraw before completion of a month, the interest will be ignore. For example, say the withdrawal date was originally on 30th May 2022. The holder decided to keep the amount with post office itself. Then after 8 months and 23 days, he decides to withdraw. The extra interest will be payable only for 8 months. Interest for 23 days will not be paid because it is less than 1 month.
  1. Encashment rules: Check above for the rules. A separate section has been created for it.
  2. Premature encashment rules: Check above for the rules. A separate section for it has been created as well.
  3. Certificate discharge: Once the payment has been made after maturity, the certificate holder needs to discharge the certificate. He or she will have to sign on the back of the certificate and give it to the post office. That is how a certificate is discharged.
  4. Mistakes rectification: There may be arithmetical or clerical mistakes. The Postmaster General is the one who has the authority to make rectifications to those mistakes. However, such rectifications are allowed only if the government is not incurring any loss.
  5. Relaxation: It may happen that after investing, a person starts facing undue hardships and may need to withdraw funds before the lock in period is over. Under such circumstances, a relaxation may be given either by approval of Central Government or on basis of humanitarian grounds.

Method of Transferring KVP Account

There are two types of transfers allowed:

  1. Ownership is transferred from one person to another person.
  2. The certificate can be transferred to a different post office from an existing post office.

From person to person transfer:

This is allowed if any of the conditions below are satisfied:

  • To a legal heir from a deceased owner.
  • To an employee from a company.
  • To joint owner from an individual owner.
  • To single owner from combined owner.
  • Court mandated transfer from an owner to another person or a law judge.

A written application will be required in all cases.

From post office to post office:

The owner of the certificate must:

  • Be an Indian
  • Must have certificate purchase eligibility.
  • Must give written consent to post office of origin of the certificate.

If all the above conditions are met, a post office to post office transfer will be allowed.

Loan Provisions Against Kisan Vikas Patra

A Kisan Vikas Patra certificate owner can take out a loan against the certificate. However, a few conditions are to be met. These conditions are:

  • The person applying for the loan should be the owner of a KVP.
  • Loan must be only and only for personal use or for business use. There should not be any speculative purpose.
  • The loan which is taken out will have the same tenure as that of the KVP certificate, that is, 8 years and 4 months or 100 months. The loan has to be repaid in full (principal + interest) within 100 months.
  • The loan margin and exact amount of loan will be decided based on maturity period of the certificate and the amount invested in KVP.

One has to remember that a though different banks offer loans against KVP, they may have different interest rates. Also, banks may charge processing fee. Interest charge and processing fee charged by banks are solely decided by them and the government executes no control in that.

Form of Kisan Vikas Patra

If a person wants to purchase a Kisan Vikas Patra, filling up a form is necessary. However, that form needs to have several information. The information that must go in the form are mentioned below:

  • The investment amount and the denomination of the KVP certificate that wants to purchase.
  • The payment mode one wants to use.
  • The certificate type one wants to (please refer above to know about the different types of certificates that are available).
  • If the certificate is to me for joint ownership, name of both owners are to be furnished.
  • If the KVP is purchased for a minor, the minors birth date and the name of the guardian who will be authorized to encash the KVP certificate has to be mentioned in the form.
  • The details of the nominees who are selected for the certificate are to be provided. These details include date of birth of each nominee and their complete address along with their names.

Once the form is completed, the investor needs to properly sign the form. A nomination witness will be required who will have to sign the slip which will be provided. The details of the witness will include signature, address and date.

The identity slip which will be furnished on purchase of the certificate will have the following details:

  • The certificate’s serial number.
  • Price of the certificate.
  • Encashment date.
  • Signature of Postmaster.
  • Other important details, if any.

The identity slip has to be presented by the owner of the certificate while encashing the certificate (either prematurely or on completion of tenure).

How to Apply for Kisan Vikas Patra?

One needs to physically go to the Post Office and fill up the form. There is no online method available. As mentioned earlier, physical presence is mandatory. So, if you are more of an online person, this is going to be difficult for you.

Important Things You Need to Know

  1. If you misplace your Kisan Vikas Patra, you can get a duplicate one. You have to request for the same from the post office from where it was originally issued. You will have to provide the identity slip if you want a duplicate KVP certificate.
  2. What if you lose the identity slip as well? In such a case, you will have to approach the post office. Further instructions will be given to you.
  3. If you have a Teacher’s Provident Fund, you cannot invest the same in Kisan Vikas Patra. It is not allowed.
  4. Co-operative banks and co-operative societies are not allowed to invent in KVP. It will be a violation of the rules.
  5. What if you intend to get citizenship of a different country after purchasing a Kisan Vikas Patra certificate? In that case, you have to withdraw the money (mostly premature withdrawal) before renouncing the citizenship of India.
  6. What if you shift to a different city after purchasing a Kisan Vikas Patra? This is a very likely possibility. In such a scenario you can either have the Kisan Vikas Patra transferred to a post office in the city where you relocate or you can simply encash the KVP from a post office of your new city. However, you need to provide the identity slip and go through several formalities to prove that you are the owner of the certificate in question. However, it is always suggested that you skip the hassle and visit your previous city for a day and have the certificate encashed. It will be far easier than encashing it from a different city.

Well, that’s pretty much everything you need to know about Kisan Vikas Patra. In case you have any question or if you feel we have missed something, feel free to drop us a message through the comments section. We will try to revert back to you as soon as possible.

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