Post Office Schemes: Check Kisan Vikas Patra Tax Rules
Kisan Vikas Patra Tax Rules: Post Office's Kisan Vikas Patra (KVP) is a scheme in which your investment is guaranteed to be doubled. In this scheme of the post office, which is being run in the name of farmers, your money gets doubled on maturity. At present, the annual interest on this scheme is 7.5 percent, which is equal to the 5 year FD i.e. time deposit scheme of the post office. But it also has disadvantages compared to investing in FD. You should also know about its advantages and disadvantages before investing in this scheme.
KVP: No tax benefits?
On investing in Kisan Vikas Patra, you have to pay tax on the interest income earned. Whereas under the Section 80C of the Income Tax Act, you do not get any tax benefit on the amount deposited in this scheme. That means the investment made by you will remain within the scope of income tax. The interest received on 5 year tax saver FD or National Savings Certificate and PPF account is tax free. At the same time, the amount deposited in these schemes gets the benefit of tax exemption under Section 80C of the Income Tax Act on amounts up to Rs 1.50 lakh. NRIs and Hindu Undivided Families (HUFs) are not eligible to purchase KVP certificates.
KVP: Tax is levied in two ways
The interest received on the amount deposited in Kisan Vikas Patra comes under taxable income. It is considered as other income and tax is imposed. This interest is taxed in two ways. The first option is cash basis taxation and the second is tax on annual interest. In the first option, the interest received on maturity is added to your income and then tax is deducted as per the tax slab. Whereas in the second option the tax is deducted every year.
In how many years will the amount double?
You are getting interest at the rate of 7.5 percent per annum on the amount deposited in Kisan Vikas Patra and your money doubles in 115 months i.e. 9 years and 7 months. Under the Kisan Vikas Patra Scheme, any adult above 18 years of age can open an account. Whereas the account can be opened on behalf of the minor by his parents or guardian. In this scheme, there is a facility to open single or joint account. Maximum 3 adults can join a joint account.
Minimum amount for investment
The minimum amount of investment in this scheme is Rs 1000, whereas no limit has been set regarding the maximum investment in it. However, it is mandatory to show PAN card for investments of more than Rs 50 thousand. People investing in Kisan Vikas Patra are being given the facility to transfer their accounts under certain conditions and circumstances. After the death of the account holder of Kisan Vikas Patra, the account is transferred to his nominee or legal heir. Also, the account is transferred in case of death of any of the joint account holders and by court order.