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Kisan Vikas Patra to double your money in 8.33 years

As informed last week, the Govt. of India was ready with its Budget 2014-15 proposal to re-introduce the Kisan Vikas Patra (KVP) Scheme and the same was expected shortly.

The details of the revived KVP have now been announced. The primary objective of re-launching the scheme is
a) to wean people away from gold,
b) protect them from fraudulent schemes

c) increase the savings rate, and
bring in the much desired financial inclusion.

The salient features of the 2014 edition of Kisan Vikas Patra Scheme are enumerated below.

1. The scheme will double your money in 8 years and 4 months (i.e. 100 months in total).

2. This works out to an effective yield of around 8.76% p.a., which is in line with the other similar investments such as PPF, Bank FDs, etc.

3. There is no upper limit on the investment; the minimum being Rs.1000.

4. Payment can be made either in cash, cheque, pay order, DD or by way debit to your savings account with the post office / bank.

5. KVP certificates would be available in denominations of Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000.

6. You can get KVP certificates issued either singly or in joint names.

7. It can be transferred from one person to another, multiple times. However, in normal cases, this transfer would be permitted only after at least one year from the date of purchase.

8. You can also conveniently get it transferred from one post office to another.

9. Even nomination is available in these KVPs. 

10. Initially you could buy KVP from post offices. Later, these would also be made available at designated branches of nationalized banks.

11. Premature encashment is permitted after a lock-in period of 2.5 years. This would be at a predefined exit value, effective returns ranging from 6.30% to 7.61% depending on the tenure already completed (See table below).

12. It can be used as a collateral to borrow money.

13. KVP does not enjoy any tax benefits.

14. To prevent money laundering, the present KYC guidelines applicable for various Post Office schemes and bank deposits would apply to KVP too.

15. Amount not withdrawn on maturity would continue to earn interest at the rate applicable to the Savings Account (which is 4% p.a. at present).

All in all, Kisan Vikas Patra is a nice scheme for investors in the nil / low income tax bracket, especially for those residing in small towns and villages where other modes of investments are practically non-existent.

Premature withdrawal amount for Rs.1000 investment
2.5 < Period < 3 years : Rs.1201
3 < Period < 3.5 years : Rs.1246
3.5 < Period < 4 years : Rs.1293
4 < Period < 4.5 years : Rs.1341
4.5 < Period < 5 years : Rs.1391
5 < Period < 5.5 years : Rs.1443
5.5 < Period < 6 years : Rs.1497
6 < Period < 6.5 years : Rs.1553
6.5 < Period < 7 years : Rs.1611
7 < Period < 7.5 years : Rs.1671
7.5 < Period < 8 years : Rs.1733
8 < Period < maturity : Rs.1798
On maturity : Rs.2000

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