Kisan Vikas Patra (KVP) Premature Withdrawal

The Indian Post Offices issue Kisan Vikas Patra or KVP to small-scale investors. The Indian government launched this scheme in 1988. It serves as a long-term investment option for investors, who want to invest even as small as Rs.1000. After maturity, the investment corpus is awarded to the investors or their nominees. Under certain specified circumstances, you can withdraw the investment corpus before the term ends.

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Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

What is Kisan Vikas Patra?

In 1988, Kisan Vikas Patra was launched as a money-saving plus investment scheme by the Indian government. This scheme was relaunched in 2014 with some modifications. After the new modification, this scheme made KYC documents such as Aadhaar and PAN cards compulsory for all investors. All the individuals who wish to invest Rs. 50,000 must produce a PAN card, and the investment exceeding Rs. 10 Lakhs must produce an income certificate.

Kisan Vikas Patra allows investors to make a minimum of Rs. 1000 rupee as an investment. This scheme does not have any upper limit on the investment amount. The ideal maturity tenure of the KVP is 124 months. However, premature withdrawals or encashment are allowed under specified circumstances. Any individuals or joint account holders can purchase the Kisan Vikas Patra. It is also issued to minors under the guardianship of adults. After nine years and four months of the date of issue of Kisan Vikas Patra, the investment corpus is doubled.

What is Kisan Vikas Patra Premature Withdrawal?

Kisan Vikas Patra works as a pledge to the government of India. Therefore, forfeiting the certificate, transferring, or even breaking this bond is against the law. There are certain scenarios like the death of the investors in the case of the single certificate holder or either or both of the certificate holders before the end of the term. After the passing away of the principal investor, the nominee can initiate the procedure of the encashment of the Kisan Vikas Patra.

The encashment of the Kisan Vikas Patra needs to be done through the proper channels such as a court of law, or it needs to be forfeited through any Gazetted government officer. Aside from the maturity period, the KVP also follows the lock-in period, which is two and a half years. The certificate can be forfeited only after the lock-in period is over. Once the certificate is forfeited, the simple interest at the time will be calculated and paid to the nominee of the investor.

If the investor wants to forfeit the Kisan Vikas Patra, they can do it. The forfeit procedure remains the same.

Three Things To Keep In Mind Before Opting For Kisan Vikas Patra Premature Withdrawal

The Lock-in period must be overserved for the premature encashment. After the end of the lock-in period, the amount can be encashed in six-month time frames, depending upon the amount. At the time of each encashment, the simple rate of interest at that time will be taken into consideration.
Instead of encashment, you can also choose to transfer it from one person’s name to another after the due permission from the postmaster.
The TDS will not be levied on the investors at the time of the disbursal of the amount. The amount will be considered the beneficiary’s income and will attract tax as per their tax slab.

Kisan Vikas Patra Premature Withdrawal Rate

If the premature withdrawal is made after one year of purchasing the Kisan Vikas Patra, investors will not earn any profit or interest on the amount invested. Investors will also be liable to penalties imposed by the post office.
Withdrawals done after between one year to two and half years will be eligible to receive the encashment amount. It will be calculated with the reduced interest rate.
After the lock-in period, which is after two and half years, the premature withdrawal will not be eligible for any penalty. The interest rate on the principal amount will be the same as the one mentioned on the Kisan Vikas Patra.

FAQ's

Can Non-Residential Indians purchase Kisan Vikas Patra?

Ans. No, the scheme of Kisan Vikas Patra applies only to the citizens of India.
Can the Kisan Vikas Patra be encashed at any Post Office?

Ans. It is preferred if you encash the Kisan Vikas Patra at the post office that issues the certificate. In case of emergencies or other circumstances, you can also encash it at any other post office. At the time of encashment, you have to produce the identity slip.
Can we get the duplicate of the Kisan Vikas Patra?

Ans. Yes, in case of the loss, damage, or theft of the Kisan Vikas Patra, you can get the duplicate from the post office.
Do banks avail Kisan Vikas Patra?

Ans. No, Kisan Vikas Patra is issued only by the post offices.
What is the current rate of interest of the Kisan Vikas Patra?

Ans. The current rate of interest of the Kisan Vikas Patra is 6.9%.

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-01-2025

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).