Kisan Vikas Patra (KVP)
Kisan Vikas Patra (KVP) is a post office savings certificate scheme that doubles the invested amount over a fixed period determined by the prevailing interest rate, currently offering 7.5% per annum compounded annually, with a maturity period of 115 months (9 years and 7 months) from the investment date.
Kisan Vikas Patra was originally launched in 1988 and was one of India's most popular small-savings instruments, particularly in rural areas due to its simplicity — the certificate doubled in value at a fixed date irrespective of market conditions. The scheme was discontinued in 2011 after concerns that bearer-form certificates were being misused for money laundering and tax evasion, as no KYC was required for purchase or transfer.
The government relaunched KVP in November 2014 with a revised framework incorporating KYC requirements for purchases above Rs 50,000. PAN card submission became mandatory for investments exceeding Rs 50,000, and KYC documents (Aadhaar or other address and identity proof) are required at all transaction levels. This addressed the opacity concerns that had led to the 2011 withdrawal. The certificate is now available in registered form, ensuring a documented holder trail.
KVP is available in denominations of Rs 1,000, Rs 5,000, Rs 10,000, and Rs 50,000 at all post offices and designated public sector bank branches. There is no maximum investment limit. The doubling period changes with interest rate revisions: at the current rate of 7.5% per annum, the maturity period is 115 months. When rates are higher, the doubling period is shorter, and vice versa, as the government adjusts KVP returns quarterly alongside other small-savings scheme rates.
Premature encashment is permitted after a lock-in of 2.5 years (30 months) from the date of issuance. If encashed between 30 months and maturity, the principal and interest accrued to the date of encashment is paid, though at a rate below the full compounding benefit. KVPs are transferable from one person to another and can be pledged as collateral for loans at banks and post offices, providing some liquidity flexibility.
For taxation, KVP interest is fully taxable as 'income from other sources' at the applicable slab rate. Unlike PPF or NSC, KVP offers no Section 80C deduction on the amount invested. TDS applies when annual interest income from all small-savings instruments combined exceeds the applicable threshold. The absence of any tax incentive on investment makes KVP less efficient than PPF or ELSS for taxpayers in higher brackets but simple and predictable for low-tax or tax-exempt individuals seeking guaranteed capital doubling.