You have money to invest, you can invest you money in Kisan Vikas Patra (KVP). But that's not valid reason for you to investment in Kisan Vikas Patra (KVP). If you ask any finance consultants now a days (FY 16-17) regarding should i invest in Kisan Vikas Patra (KVP)? Then most of time answer would be NO.
Any reasons, why one should not invest in Kisan Vikas Patra (KVP)? There are four reasons to that:
- Low interest rate of return
- No benefit under income tax
- Huge Locking period
- Interest is even taxable
Low interest rate of return: As per new rate of interest changes form April 2016, Kisan vikas patra has interest rate of 7.1%. It is lowest amongs other government schemes such as Public Provident Find(PPF), National Savings Certificate, etc.
No benefit under income tax: You might be surprised that Kisan vikas patra (kvp) is not providing tax benefits. Unlike other government saving schemes which provides tax benefit upto 1.5 lack under section 80-C, kisan vikas patra is one of them.
Huge Locking period: Locking period for Kisan Vikas Patra (KVP) is 9 year and 2 month. Which is visibly huge.
Interest is taxable: Let's say Mr.X have done investment in this scheme. Mr.X has got lowest rate of interest from this scheme, but it was okayed for Mr.X because this is government scheme. Mr.X also does not get any tax benefit from his investment, but some how Mr.X accepted it with heavy heart and let investment till it's maturity time that is 9 years and 2 month. Now Mr.X is happy that his wait is over, and he'll taste fruits of his investment. But here comes twist, INTEREST EARNED IS TAXABLE. Suppose Mr.X has invested 1lac ruppes, he'll earn another 1 lack and Mr.x has to pay tax for these earnings.
So clearly it is not wise decision to invest in Kisan Vikas Patra (KVP) at this time. There are another great schemes available such as Public Provident Fund, National Savings Certificate, etc.