Difference Between Kisan Vikas Patra & Public Provident Fund
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.
Kisan Vikas Patra 2024: Kisan Vikas Patra is commonly known as KVP. KVP is one of the best small savings schemes offered by the Post Office. KVP doubles the lump sum investment in 115 months. If someone has invested Rs.5 lakh in Kisan Vikas Patra then he will receive Rs 10 lakh on maturity after 115 month. Initially, Kisan Vikas Patra was introduced only for farmers but later it has been made available to everyone and now, any Indian national can invest in KVP.
KVP does not have any limit on maximum investment while the minimum limit of investment in KVP is Rs1,000 and then in multiples of Rs.100 thereof. KVP is the best option for risk-averse individuals for those who have extra money to invest which they do not require in the near future. Loan against KVP certificate is available with ease and quickly too.
PPF: PPF is an abbreviation of 'Public Provident Fund'. It is a scheme of the Central Government of India offered for investment which not only generates guaranteed returns but also gives tax rebate under section 80C of Income Tax. Any individual, who is a resident of India, can open a PPF account either in his own name or on behalf of a minor which means that PPF accounts can also be opened by parents for their minor children.
PPF account offers EEE (Exempt, Exempt, Exempt) tax benefit to the investors which means that:
- All the contributions made (maximum upto Rs 1.5 lakhs each financial year) can be claimed for tax rebate under Section 80C of the Income Tax
- The interest earned on the PPF account is tax free
- The maturity proceeds of the PPF account are exempt from tax
It is noteworthy here to mention that the amount deposited in dependent spouse's or children's PPF accounts is eligible to claim tax benefit by you.
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. | 7.10% p.a. |
| Interest Compounding | Compounded annually | 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 |
| Who Should Invest | Who want to double their money in a fixed tenure | Who want to invest to get tax rebate and ready to invest for 15 years |
| Tax on Interest Earned | Taxable as per your tax slab | Completely 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 |
| Transferability | You can transfer a KVP certificate to another person | A PPF account is not transferable to another person |
| 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 |