Safe Harbour. The nitty gritty of KVP investment

Higher post-tax returns and the benefit of 80C tax deduction make the NSC and the PPF score over the re-launched Kisan Vikas Patra (KVP). But for those in the lower income bracket (tax-exempt category), KVP is a good investment option. You can invest any amount, which will be doubled at the end of the maturity period of eight years and four months. Here are the procedures relating to investment, transfer and premature encashment.

Investment in the KVP can be made by a single person or two individuals jointly through cash, a cheque or a draft. The KVP can also be bought on behalf of a minor.

If you are investing less than ₹50,000, you only need to submit a proof of identity and of residence. Otherwise, you will also have to submit a copy of your PAN card or Form 16 (in the absence of the former). But given that there is no limit to the number of KVPs that can be bought, there’s nothing stopping you from buying these certificates in smaller denominations of ₹1,000, ₹5,000 and ₹10,000, instead of the ones in ₹50,000, to get away from providing your PAN card details.

While the maturity period for a KVP certificate is 100 months, premature encashment anytime before that is allowed in case of the death of the holder/holders of the KVP. In such a case, the original amount invested along with simple interest calculated for the complete months for which the certificate was held will be paid.

In any case, you can encash your KVP anytime after the expiry of the lock-in period, which is two years and six months from the date of issue of the certificate. The newly released Kisan Vikas Patra Rules 2014 list out the amount payable on premature encashment at different periods of time after the lock-in period. If the amount being encashed is less than ₹20,000, payment will be made in cash.

You can transfer your certificate anytime after the expiry of at least one year from the date of purchase. However, in case of the death of the certificate holder, a transfer to the heir or the nominee will be allowed even before the expiry of one year. The same holds true in case of a transfer being made in the name of the survivor on the death of one of the joint holders.

To facilitate the transfer, you need to submit a form with a valid reason for the approval of the transfer by the designated officer in the post office.

Alongside, the identity and address proof of the transferee is also needed. Additionally, you need to submit a copy of the transferee’s PAN card too if the certificate is for ₹50,000 or above.

A transfer is, however, not permitted where a certificate is held in the name of the minor while the minor is alive.

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