Difference Between Kisan Vikas Patra (KVP) & Public Provident Fund (PPF)
There are a lot of post office saving schemes offered by post office in India to the people having variety of investment needs. This set of financial instruments encourages saving and provide financial security to the people of India.
As these Post Office schemes are backed by the government, they are safe and reliable investment avenues for the individuals. Post offices in India offer their services to the people through a vast network of over 1.55 lakh post offices and around 5.70 lakh employees.
Two important post office saving schemes offered by post office in India are Kisan Vikas Patra (KVP) and Public Provident Fund (PPF). Both offer investment benefits but they differ in objective of investment. Let us check out major differences between Post Office KVP and Post Office PPF in order to make proper investment decision.
| Basis for Difference | Kisan Vikas Patra (KVP) | Public Provident Fund (PPF) |
|---|---|---|
| Purpose | KVP is a post office certificate scheme which doubles a one time investment in a certain period of time | PPF is a long-term investment scheme which offers high and guaranteed returns |
| Interest Rate (p.a.) | 7.50% p.a. compounded annually | 7.10% p.a. compounded annually |
| Minimum Investment | Rs.1000, in multiples of 100 thereafter | Rs.500 in one financial year |
| Maximum Investment | No limit | Rs.1.50 lakhs in one financial year |
| Eligibility | Individuals including minors | Individuals including minors |
| Tenure | 115 months i.e. 9 years and 5 months | 15 Years |
| Tax on interest earned | Taxable as per your tax slab | Tax Free |
| Tax Implication | Does not qualify for the 80C deductions. However, no TDS will be made from the KVP maturity proceeds | Qualifies for deduction under section 80C of Income Tax Act |
| Others |
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Traits of KVP: The certificates of KVP are available in denominations Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000. KVP interest rates are set and reviewed by the government of India on a quarterly basis. Interest income received by the scheme is completely taxable. KVP deposits can be encashed prematurely but only after 2 years & 6 months (30 months) from the date of issue of the KVP. Unlimited number of KVP accounts can be held by an individual with a minimum deposit of Rs.1000 and then in multiples of Rs.100.
Key characteristics of PPF: PPF is an excellent investment option for people uncomfortable with taking risks as it offers guaranteed and risk-free returns. Investments under PPF can be either made in a lump sum or in a maximum of 12 instalments per financial year. Investment over Rs.1.50 lakhs in one financial year will not be given any interest. Opening of PPF account in joint names is not allowed. Partial withdrawal in PPF amount is allowed from the seventh financial year onwards.
Post Office Investment Options
| Serial Number | Investment Option | Rate of Interest (p.a.) |
|---|---|---|
| 1 | Post Office Savings Account | 4% payable annually |
| 2 | Post Office Recurring Deposit | 6.70% per annum compounded quarterly |
| 3 | Post Office Monthly Income Scheme (MIS) | 7.4% per annum payable monthly |
| 4 | Post Office Time Deposit (POTD) | 1yr:6.9%, 2yr:7.0%, 3yr:7.1% & 5yr:7.5% |
| 5 | Kisan Vikas Patra (KVP) | 7.5% compounded annually |
| 6 | Public Provident Fund (PPF) | 7.10% compounded annually |
| 7 | Sukanya Samriddhi Yojana (SSY) | 8.2% compounded annually |
| 8 | National Savings Certificate (NSC) | 7.70% compounded annually |
| 9 | Senior Citizen Savings Scheme (SCSS) | 8.20% payable quarterly |
| 10 | Mahila Samman Savings Certificate (MSSC) | 7.50% compounded quarterly |