So, you never gave a serious thought to Kisan Vikas Patra (KVP) as an alternative debt instrument

because you did think that it is only meant for farmers...Didn't you? Ive also been so busy promoting PPF that KVP almost escaped attention. But then Purab asked [see: What is right time to buy a home?], I have 3 Lakh to invest, how is Kisan vikas patra for mid/long term investment. Let me rephrase the question Other than the tax-saving debt instruments available for investments (e.g. PPF, NSC, Bank FDs), which debt instruments can be regarded as good from medium to long term investment point of view? Due to the current low-interest rate regime, small savings instruments have once again started looking attractive. KVP is also a small saving instrument available at post offices offering a pre-tax return of 8.41% per annum (your money doubles in 8 years & 7 months).

Basic Features:
1. Easy to purchase: Available in denominations of Rs 100, Rs 500, Rs 1000, Rs 5000, Rs 10,000 and Rs 50,000. No a/c opening hassles are involved. Just go to a post office fill a form, hand over the cash or cheque / DD and youre done. Further there is no limit as to number of KVP certificates you can purchase or maximum amount you can invest. 2. Post-tax Yield: The interest is taxable on annual basis (although no TDS is involved). The post-tax yield from KVP depends on the marginal tax rate that will be applicable to you. 3. Premature encashment is possible just after 2.5 years (2 years & 6 months) but it is very costlysee the table: Period--------------------------Yield---------------Reduction in Yield Up to 2.5 years -----------------NA--------------------------NA 2.5 years to 3 years-------------6.5%-----------------------1.91% 3.5 years to 4.5 years-----------7.0%----------------------1.41% 5 years to 6 years----------------7.5%----------------------0.91% 6.5 years to 8 years--------------8.0%----------------------0.41% 8 years & 7 months--------------8.4%----------------------nil

4. Loan facility is also available against KVP by pledging it with the bank.

Comparison with PPF & NSC:

No doubt PPF, NSC, Tax-saving bank FDs have an edge over KVPs due to associated tax benefits. But once you exhaust your section 80C limit & PPF investment limit, investing in KVP becomes an attractive proposition. KVP vs. PPF PPF maintains its superiority over all other small-saving schemes (even ignoring the section 80C tax benefit) because the post-tax yield of PPF is substantially higher than all other debt instruments. PPF is the only debt instrument (other than the EPF), where your interest income is completely exempt. Accordingly the tax-free interest of 8% from PPF is much better than 8.41% taxable interest from KVP. However, if your total income is either nil or less than basic exemption limit, then KVP will score over PPF. Even after implementation of Direct Tax Code (DTC) which will make the PPF withdrawals taxable, post-tax returns of PPF will be better than KVP. KVP vs. NSC Now, lets come to KVP vs. NSC. Isnt NSC a better debt instrument than KVP (even after ignoring section 80C tax benefit on the amount invested in NSC)? Lets see 1. Returns: Yield is 8.40% from KVP as against 8.16% from NSC. 2. Taxation: First, NSC is one of the eligible instrument u/s 80C i.e., the amount of your income invested in NSC gets exempted from tax. Second, returns of both the instruments are chargeable to tax. But unlike KVP, NSC interest is again eligible for deduction u/s 80C. But if your section 80C limit is already exhausted, then this tax benefit offered on NSC is of no good. In short, considering tax benefits NSC is undoubtedly better than KVP (Note: there wont be any more tax benefit on NSC after implementation of DTC). However, if tax is not the criteria, then KVP returns are a little better than NSC and with a longer investment period of about 2.5 years.

Comparison with other Debt Instruments:

Over the last year, returns offered on bank FDs are steadily coming down. At present 5- to 10-yr bank FDs are offering interest in the range of 7.25% to 7.75%. The YTM of non-convertible debentures is also coming down. The following is the maximum YTM of NCDs issues during last one year TATA Capital NCD -------------->12% Shriram Transport NCD--------->11.50% L&T Finance NCD (1st issue)--->10.50% L&T Finance NCD (2nd Issue)-->8.58% Although the YTM of 8.58% (accompanied with interest rate risk) on the L&T finance NCD 2nd issue in February 2010 was almost at par with KVP, the duration was 3 years as against almost 9 years of KVP.

Coming to medium and long term debt mutual funds, the 5-Yr category average returns are somewhere between (As on March 2010) 6 and 7 percent with some tax benefit due to tax arbitrage. Moreover, when there are chances of increasing interest rates, it is very risky to invest in long term debt funds. So, due to above reasons, KVPs have started looking very attractive debt instrument offering relatively better returns without any risk.

Conclusion:
In a nutshell, if youve completed your tax savings and are looking for a debt instrument offering assured good returns combined with safety and liquidity then KVP is a good choice. In other words, invest in KVP if youre done with your tax saving investments and further exhausted your PPF investment limit (including your spouse & children) but make up your mind that youll remain invested till the maturity because if you make a premature exit, your effective yield will be considerably lower (the facility of making an early exit can be exercised in an emergency by sacrificing some returns).

So, you never gave a serious thought to Kisan Vikas Patra (KVP) as an alternative debt instrument
because you did think that it is only meant for farmers...Didn't you? Ive also been so busy promoting PPF that KVP almost escaped attention. But then Purab asked [see: What is right time to buy a home?], I have 3 Lakh to invest, how is Kisan vikas patra for mid/long term investment. Let me rephrase the question Other than the tax-saving debt instruments available for investments (e.g. PPF, NSC, Bank FDs), which debt instruments can be regarded as good from medium to long term investment point of view? Due to the current low-interest rate regime, small savings instruments have once again started looking attractive. KVP is also a small saving instrument available at post offices offering a pre-tax return of 8.41% per annum (your money doubles in 8 years & 7 months).

Basic Features:
1. Easy to purchase: Available in denominations of Rs 100, Rs 500, Rs 1000, Rs 5000, Rs 10,000 and Rs 50,000. No a/c opening hassles are involved. Just go to a post office fill a form, hand over the cash or cheque / DD and youre done. Further there is no limit as to number of KVP certificates you can purchase or maximum amount you can invest. 2. Post-tax Yield: The interest is taxable on annual basis (although no TDS is involved). The post-tax yield from KVP depends on the marginal tax rate that will be applicable to you. 3. Premature encashment is possible just after 2.5 years (2 years & 6 months) but it is very costlysee the table:

Period--------------------------Yield---------------Reduction in Yield Up to 2.5 years -----------------NA--------------------------NA 2.5 years to 3 years-------------6.5%-----------------------1.91% 3.5 years to 4.5 years-----------7.0%----------------------1.41% 5 years to 6 years----------------7.5%----------------------0.91% 6.5 years to 8 years--------------8.0%----------------------0.41% 8 years & 7 months--------------8.4%----------------------nil

4. Loan facility is also available against KVP by pledging it with the bank.

Comparison with PPF & NSC:

No doubt PPF, NSC, Tax-saving bank FDs have an edge over KVPs due to associated tax benefits. But once you exhaust your section 80C limit & PPF investment limit, investing in KVP becomes an attractive proposition. KVP vs. PPF PPF maintains its superiority over all other small-saving schemes (even ignoring the section 80C tax benefit) because the post-tax yield of PPF is substantially higher than all other debt instruments. PPF is the only debt instrument (other than the EPF), where your interest income is completely exempt. Accordingly the tax-free interest of 8% from PPF is much better than 8.41% taxable interest from KVP. However, if your total income is either nil or less than basic exemption limit, then KVP will score over PPF. Even after implementation of Direct Tax Code (DTC) which will make the PPF withdrawals taxable, post-tax returns of PPF will be better than KVP. KVP vs. NSC Now, lets come to KVP vs. NSC. Isnt NSC a better debt instrument than KVP (even after ignoring section 80C tax benefit on the amount invested in NSC)? Lets see 1. Returns: Yield is 8.40% from KVP as against 8.16% from NSC. 2. Taxation: First, NSC is one of the eligible instrument u/s 80C i.e., the amount of your income invested in NSC gets exempted from tax. Second, returns of both the instruments are chargeable to tax. But unlike KVP, NSC interest is again eligible for deduction u/s 80C. But if your section 80C limit is already exhausted, then this tax benefit offered on NSC is of no good. In short, considering tax benefits NSC is undoubtedly better than KVP (Note: there wont be any more tax benefit on NSC after implementation of DTC). However, if tax is not the criteria, then KVP returns

are a little better than NSC and with a longer investment period of about 2.5 years.

Comparison with other Debt Instruments:

Over the last year, returns offered on bank FDs are steadily coming down. At present 5- to 10-yr bank FDs are offering interest in the range of 7.25% to 7.75%. The YTM of non-convertible debentures is also coming down. The following is the maximum YTM of NCDs issues during last one year TATA Capital NCD -------------->12% Shriram Transport NCD--------->11.50% L&T Finance NCD (1st issue)--->10.50% L&T Finance NCD (2nd Issue)-->8.58% Although the YTM of 8.58% (accompanied with interest rate risk) on the L&T finance NCD 2nd issue in February 2010 was almost at par with KVP, the duration was 3 years as against almost 9 years of KVP. Coming to medium and long term debt mutual funds, the 5-Yr category average returns are somewhere between (As on March 2010) 6 and 7 percent with some tax benefit due to tax arbitrage. Moreover, when there are chances of increasing interest rates, it is very risky to invest in long term debt funds. So, due to above reasons, KVPs have started looking very attractive debt instrument offering relatively better returns without any risk.

Conclusion:
In a nutshell, if youve completed your tax savings and are looking for a debt instrument offering assured good returns combined with safety and liquidity then KVP is a good choice. In other words, invest in KVP if youre done with your tax saving investments and further exhausted your PPF investment limit (including your spouse & children) but make up your mind that youll remain invested till the maturity because if you make a premature exit, your effective yield will be considerably lower (the facility of making an early exit can be exercised in an emergency by sacrificing some returns).

http://www.themoneyquest.com/2010/03/investing-in-kvp-kisan-vikas-patra.html

Kisan Vikas Patra Basics

Details about who all can and how can one invest in to KVPs along with other benefits

Apnapaisa

28 Dec 2010
Kisan Vikas Patras (KVPs) - Discontinued w.e.f. December 1, 2011 Kisan Vikas Patras (KVPs) are available at all Head Post Offices and authorized post offices throughout India. The KVPs are measured as the most safe investment tool, as it has the backing of the Government of India. The principal is assured (guaranteed) and it is deemed to be a safe avenue for investing your money. KVP is suitable for an increase in investment as it accumulates money at a fixed rate, and money doubles at the end of the specified period. It is for those looking for guaranteed returns. KVP can be purchased by an adult who is a resident in India. It can also be bought jointly or by an adult on behalf of a minor There is No investment limit on investment. Certificates are available in denominations of Rs.. 100/-, Rs.. 500/-, Rs.. 1000/-, Rs.. 5000/-, Rs.. 10,000/-, in all Post Offices and Rs.. 50,000/- in all Head Post Offices. Money doubles in 8 years 7 months. 8.40 per cent per annum compounded yearly. Nomination facility is available. The nomination can be made or changed any time during the investment tenure. The certificates are transferable to any post office in India as well as can transfer one person to another but before maturity. KVPs can be encashed at the Post Office of its issue. These can also be encashed at any other Post Office if the Officer-in-Charge of that Post Office is satisfied with the production of Identity Slip or on verification from the Post Office of issue that the person presenting the certificate for encashment, is entitled thereto. A Certificate can be encashed after two years and six months and the interest paid will be as the rules announced by the Govt. Of India from time to time Facility for premature encashment as per the table given below (for the KVP purchased on or after 1st March 2003). Deduction u/s 80C Interest Taxability No Income Tax Exemption under section 80 C is available for KVP. Interest accrued on yearly basis will be taken as income for Income Tax purposes, but no TDS will be deductible. Deposits are exempt from Wealth tax. KVP can be pledged as security against a loan to Banks/Govt. Institutions. KVPs can be purchased in Demat Form from select Post Offices. On written request duplicate certificate can be issued in case of lost, stolen, destroyed, Mutilated or defaced certificate. KVP can be purchased or reimbursed through power of attorney also. The Govt. of Maharashtra has declared the KVP as a Public Security under the provision of Mumbai Public Trust Act. 1950.

Who Can Purchase Investment Amount Maturity period Interest Rate Nomination facility Transferability

Encashment

Premature Encashment

Other features

Kisan Vikas Patra could be a better option in a low interest rate regime as it's safe and offers high returns with liquidity. But it's meant for only those who are not looking for regular income and are done away with their tax planning for the current year so far.

Extra points : Kisan vikas patra (KVP) is a very good investment purpose plan which doubles your money in eight years and seven months. It can be encashed after two and half years with the condition of interest forfeited. The features of kisan vikas patra are as follows.

http://www.apnapaisa.com/investment/small-saving-scheme/kisan-vikas-patras.html

Pros and Cons of Kisan Vikas Patra (KVP)

By admin on Nov 02, 2010 with Comments 0

Rating: 0.0/10 (0 votes cast) Are you a risk averse investor? Are you looking at investing in some debt instrument? Are you done with your tax saving investments and have also exhausted your PPF limits? You do notwant regular income and don’t mind locking your money to earn double returns. Then Kisan Vikas Patra can be a an instrument where you can invest. Whilethe name suggests that only a farmer caninvest money in Kisan Vikas Patra it is not the case. Anyone wishing to investmoney at safe places can go for Kisan Vikas Patra. Kisan Vikas Patra (KVP) is a saving instrument that provides interest incomesimilar to bonds. The KVP is a safe investment tool, as it is backed by theGovernment of India. The principal is assured and hence it is a safe avenue for investing your money. With low interest rate regime, such saving instruments are in limelight again. Some features about Kisan Vikas Patra KVP is available at all Head Post Offices and authorized post offices throughoutIndia The investment in KVP could be as small as Rs 100. It is available in denominations of Rs 100, Rs 500, Rs 1000, Rs 5000, Rs 10,000 and Rs 50,000. There is no upper limit and hence a person can purchase any number of certificates as one wish to invest. Further investing in it is also simple. One neednot open any accounts. Just fill a form and you can purchase the certificates by paying cash, cheque or DD. It can be purchased: by an adult in his own name, or on behalf of a minor, a Trust or two adults jointly

The best thing about KVP is that you double your money. If you invest Rs 1 lakh, you would earn Rs 2 lakhs after eight years and seven months. The maturityperiod is fixed. A rate of 8.41% per annum is offered at present. The interest on KVP is compounded half-yearly. This is more earnings, than fixed deposits. Premature encashment of the certificate is not permissible except at a discount in the case of death of the holder(s), forfeiture by a pledgee and when ordered by a court of law. KVP can be pledged as security against a loan to Banks/Govt. Institutions and are transferable to any Post office in India. Further, they are transferable from oneperson to another person before maturity. Some drawbacks 1) While premature encashment is possible, it is after 2.5 years and turns out to be a costly affair as the yield would be    2) 3) The No deposits are tax exempt from benefit as Tax Deduction at Source but compared (TDS) at lower. to PPF and NSC. the time of withdrawal. no TDS

4) Interest income is taxable 5) Deposits are exempt from Wealth tax.

Conclusion When comparing to PPF and NSC it may not look to be a good investment. However, compared to a FD it offers a higher rate of return in the current scenario. While the interest earned on KVP is taxable in the same manner as interestincome earned on bank FD, the KVP holder is not required to pay TDS unlike a bank FD where interest income of Rs 10,000 or more attracts TDS. So when you commit yourself to tax planning this year see if you can allocate any excess funds you might have for KVP which would be a good investment option in the times of low rate of interest. KVP is especially beneficial for people who do not require regular income and want the money at a later date and/or do not have taxable income. KVPs are attractive as an investment avenue with relatively better returns without any risk. Kisan Vikas Patra Please note The following information is as per our records, for latest information please contact your nearest post office. 1) 2) 3) 4) 5) Minimum Investment Rs. 500/- No maximum limit. Rate of interest 8.40% compounded annually. Money doubles in 8 years and 7 months. Two adults, Individuals and minor through guardian can purchase. Companies, Trusts, Societies and any other Institution not eligible to purchase.

6) 7)

Non-Resident Indian/HUF are not eligible to purchase. Facility of encashment from 2 years.

8) Maturity proceeds not drawn are eligible to Post office Savings account interest Kisan Vikas Patra height=200 src=http://www.paisayehpaisa.com/wp-content/uploads/769[1].jpg width=200 />for a maximum period of two years. 9) Facility of reinvestment on maturity.

10) Kisan Vikas Patras can be pledged as security against a loan to Banks/Govt. Institutions. 11) Kisan Vikas Patras are encashable at any Post office before maturity by way of transfer to desired Post office. 12) Kisan Vikas Patras are transferable to any Post office in India. 13) Kisan Vikas Patras are transferable from one person to another person before maturity 14) Duplicate can be issued for lost, stolen, destroyed, mutilated and defaced patras. 15) Nomination facility available. 16) Facility of purchase/payment of Kisan vikas Patras to the holder of Power of attorney. 17) Rebate under section 80 C not admissible. 18) Interest income taxable but no TDS (Tax deduction at source). 19) Deposits are exempt from Wealth tax.

http://www.paisayehpaisa.com/kvp/pros-and-cons-of-kisan-vikas-patra-kvp/

Features, returns and liquidity of Kisan Vikas Patra from Indian Post Office
By admin on Nov 04, 2010 with Comments 4

Rating: 9.0/10 (1 vote cast) Kisan Vikas Patra (KVP) doubles your money in 8 years and 7 months with the advantage of premature withdrawal. KVP is sold through all Head Post Offices and other authorised post offices throughout India. The rate of return is 8.41 per cent, compounded annually. KVP accumulates money at a fixed rate, and your money doubles in 8 years and 7 months. But KVP is not meant for regular income. It is for

those looking for a safe avenue of investment without the pressing need for a regular source of income. Features:

The minimum investment in KVP is Rs 100. Certificates are available in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000, Rs 10,000 andRs 50,000. The denomination of Rs 50,000 is sold through head post offices only. There is no limit on holding of these certificates. Any number of certificates can be purchased. A KVP is sold at face value; the maturity value is printed on the Certificate. It is a good option if you are looking for hassle-free investment as it assures a certain sum of money at the expiry of the duration of yourinvestment. With a fixed rate of return, KVP does not provide safeguards against the perils of high inflation rates. Depending on whether the finance company or the bank from where you are raising the loan accepts it or not. Some banks accept it for raisinghouse loans. Income is assured at the prescribed rate of interest. As mentioned, this is a risk-free investment channel as the KVP comes with the backing of the Government of India. Since the KVP has the backing of the Government of India and is, therefore, extremely safe, it does not require any commercial rating. KVP is not a bearer certificate, and is not easily transferable. Permission of the post master is required for any transfer. These cannot be traded in the secondary market. KVP cannot be traded in the secondary market and, hence, the question of its market value does not arise. KVP is held physically in the form of certificates that are issued to the investors by the post office. The option of holding KVP in demat form is not available. Although no TDS is applicable on the interest income from KVP, there are no tax incentives as per the provisions of the Income Tax Act, 1961. Maturity on providing proper identity and by simple discharge of the certificate on the reverse.

Returns: KVP Scheme doubles money in seven years and three months. What is the liquidity of KVP?

If the premature encashment takes place within a period of one year from the date of purchase of the certificate, only the face value of the certificate shall be payable. No interest is payable in this case. After the expiry of one year, but before two years and six months from the date of the issue of the certificate, the face value of the certificate together with simple interest at the specified rate for the completed months for which the certificate has been held, shall be payable. If a certificate is encashed any time after expiry of two-and-a-half years, the amount payable is as specified by the government from time to time.

http://www.paisayehpaisa.com/kvp/kisan-vikas-patra-some-facts/

Features and Benefits

> Features and Benefits There are many Kissan Vikas Patra benefits that you can avail by purchasing KVP. Some of
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them are:

One can start a saving habit by buying KVP of the lowest value i.e. Rs. 100. KVP can be bought from Rs. 100 to Rs. 50000 face value (Rs.100, Rs.500, Rs.1000 Rs.5000, Rs.10000 and Rs.50000. The value that the holder will receive on completion of eight years and seven months is declared on the KVP itself. There is no upper-limit for buying or owning these KVPs. The most important of the many Kissan Vikas Patra benefits is that, being a Government scheme that encourages small savings, it is completely secure. Small investors who want security for their investment find the KVP ideal. The fixed rate of interest that assures doubling of the principal amount in eight years and seven months is secured as it is a government bond. However, the inflation would erode the value and that cannot be controlled. Many finance companies and banks accept Kisan Vikas Patra as collateral against loan for housing etc. Kissan Vikas Patra benefits can be availed only by the holder of the KVP since KVP is issued in the name of the holder and cannot be transferred without completing due formalities. To get the KVP transferred on any other name the permission of the Post Master is required. The value of the Kisan Vikas Patra is the value at issuance and those that are encashed prematurely get the amount invested with some interest if they are encashed after a lockin period of two and half years. Kissan Vikas Patra benefits do not include being traded in the secondary-market. Kissan Vikas Patra benefits include the simplicity of use of these certificates. KVPs are physical instruments that are held as printed certificates. There are no demat forms of these certificates. There are no direct KVP tax benefits since interest accrued on Kisan Vikas Patra is taxable. The only KVP Tax benefit is that there is no Wealth Tax liable on Kisan Vikas Patra. KVP has complete exemption from Wealth-Tax. The another benefit from the KVP tax benefits available (if it can be called a benefit) is that at the time of disbursal or encashment of the KVP, tax is not deducted at source (TDS) but is paid in full to the holder. It is the responsibility of the holder of KVP to pay the taxes on the interest accrued. Premature withdrawal of the KVP is also allowed and the full invested amount and same interest is paid to the holder after two and a half years of issue of the certificates.

http://www.kisanvikaspatra.com/kisan-vikas-patra-features-and-benefits.htm