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NewKVP:WhatyouneedtoknowLivemint

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FIRSTPUBLISHED:TUE,NOV182014.0715PMIST

NewKVP:Whatyouneedtoknow
Ifyouarelookingforreturns,therearebetterfixedincomeoptionsavailablethanKVP
VivinaVishwanathan
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iStockPhoto

SLIDESHOW
MON,MAR232015.0304PM

FinanceministerArunJaitleyon18NovemberrelaunchedKisanVikas
wasfirstlaunchedon1April1988,withamaturityperiodoffiveyearsand

LookingbackatLeeKuan
Yew,founderofmodern
Singapore

sixmonths.Theproductisbeingrelaunchedtoprovideaneasyinstrument

FRI,MAR202015.0819PM

ofsavingtothosewhodonthaveaccesstoothersuchinstrumentsand

Inroyalcountry

Patra(KVP)thesmallsavingsschemethatwasdiscontinuedin2011.It

haveto,therefore,gowithcashorbuygoldandsilver.
Asrealtyfirmsdiversify,
businessstructures
change

ThefinanceministerhadstatedinthebudgetinJulythathewantedtore

FRI,MAR202015.0819PM

PhotoEssay:Suchalong
journey

introducetheproduct.KVPhasbeenreintroducedtogivedirectiontothe
moneylyingidleinthebankorinformofcash,bothbankedandunbanked
savings,reiteratedJaitleyatthelaunchinNewDelhi.Healsosaidthat

FRI,MAR202015.1220PM

domesticsavingsratehadfallentobelow30%andhenceitwasimportant

LakmeFashionWeek2015:
ManishMalhotra,
Bollywooddefinesummer

toencouragedomesticsavings.ThemediacampaignforKVPwasalso
startedonTuesday.
Vistara,AirAsiacouldfly
abroadintwoandahalf
years

WhatisKVP?Shouldyouinvest?Readontofindtheanswers.

look
MOREFROMTHISSECTION

Whatsonoffer?

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3/24/2015

NewKVP:WhatyouneedtoknowLivemint
KVPisafixedincome,longtermandriskfreegovernmentrunproduct.
TheminimuminvestmentamountrequiredtostartwithisRs
1,000.Earlier,
.
theminimumwasjustRs
100.Inthenewversion,youcanonlyinvestinthe
.
denominationsofonlyRs
1,000,Rs
.
5,000,Rs
.
10,000andRs
.
50,000.Thismeans
.
youcantinvest,say,Rs
1,500,orRs
.
2,500,orRs
.
5,500.Ifyouwanttoinvest,
.

Saharagetsthreemonths
tosubmitfinalproposalto
raisefunds

say,Rs
60,000,youwillhaveuseacombinationof,say,Rs
.
10,000and
.
Rs
50,000.Thereisnomaximumlimit.ThenewtenorforKVPiseightyears
.
andfourmonths.Earlier,thematurityperiodwasalittlelongereight
yearsandsevenmonths.
InvestmentsinKVPwillbedoubledin100months.However,thereareno
taxbenefits.
Prematurewithdrawalisallowedafterthelockinperiodoftwoyearsand
sixmonthsisover,orincaseoftheholdersdeath.
Afterlockinperiodisover,youcanwithdrawanytimebutconditionsapply.
First,youcanwithdrawonlyapredeterminedamount.Andsecond,the
interestwillapplyforsixmonthtranches.Forinstance,ifyouwithdrawthe
moneyin,say,threeyearseightmonths,youwillgettheinterestthat
appliedtoathreeyearsixmonthperiod.
Youcanalsoavailaloanagainstit,buttheamountwillvaryacrossbanks.
Forinstance,ifyoupledgeKVPthatscompletedtwoyearsbutlessthan
threeyears,thenAllahabadBankwillgive90%ofthefacevalue.
OnecaninvestinKVPeitherasasingleholderorasajointholder.You
canalsopurchasetheproductonbehalfofaminorchild.KVPcanbe
transferredtoanyotherpersonmultipletimes.Youwillbeallowedto
transferfromonepostofficetoanother,andcanalsochangethe
nomination.Asofnow,youcanbuyKVPfromanypostofficeorfroman
authorizedagent.Toinvestintheproductyouwillhavetodosubmitknow
yourcustomer(KYC)relateddocuments,whichincludeaphotoidentity ALSOREAD
proof(suchaspassportorvotersidentity)andaddressproof.

close

CairnEnergyseekscompensation
fromIndiaontaxdemand
IfyouinvestmorethanRs
50,000,youwillalsohavetosubmitacopyofyour
.
PermanentAccountNumber(PAN)card.IncaseyouinvestmorethanRs
10
.
lakh,youwillalsohavetosubmitdocumentsthatshowthesourceoffunds.
ThegovernmentplanstomakeKVPavailablethroughdesignated
branchesofnationalizedbanksaswell.Thesebanksarelikelytobethe
onesthatalreadydistributePublicProvidentFund.
Youcanonlyinvestinthephysicalformand,hence,needtovisitapost
office.Asofnow,theproductisnotavailableonline.
Calculatingreturns
Asthematurityperiodofthe
producthasnowbeenreducedto
eightyearsandfourmonths,the
returnsareslightlyhigherat
8.67%(itwas8.25%).
DorememberthatKVPis
essentiallymeantforthosewho
donthaveaccesstoanyother
savingsvehicle,andthatthere
arebetterproductsavailable.
Thisisforpeoplewhohaveno
accesstootherassetclassesand
comeunderthelowerendofthe

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3/24/2015

NewKVP:WhatyouneedtoknowLivemint
economicspectrum.Inasense,itiscomparablewithbankfixeddeposits.
However,asofnow,manybanksaregivingbetterreturns(onfixed
deposits),saidSureshSadagopan,aMumbaibasedfinancialplanner.
Withnotaxationbenefit,KVPdoesntworkforthoseinthehigherincome
group.Onmaturity,theinterestincomeistaxedatyourmarginalrate.So,if
youareinthehighesttaxbracketof30.9%,theeffectiverateofreturnwill
be5.99%.Ifyouareinthe20.6%and10.3%taxbrackets,theeffective
returnswillbe6.88%and7.78%,respectively.
Thisproductworksforonlythosewhoeithercomeinthenotaxorlowtax
bracketandalsoforthosewhocanteasilyaccessbanks,saidSurya
Bhatia,aDelhibasedfinancialplanner.
Hence,ifyouhaveaccesstootherfixedincomefinancialproducts,stay
awayfromKVP.

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KISANVIKASPATRA FIXEDINCOME RETURNS TAX

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