FD vs Kisan Vikas Patra- Before investing money anywhere, it is beneficial to compare all the available options. If you want to invest money in FD, then you should also know about the advantages of Kisan Vikas Patra.
Risk-averse investors invest a lot of money in small savings schemes and bank FDs. Bank FDs are the favorite investment option of Indians. A lot of money is invested in fixed deposits because of the zero risk of losing money and guaranteed returns. Small savings schemes of post office also have almost the same features. One such small savings scheme is Kisan Vikas Patra. It is a popular savings scheme.
Axis Bank, HDFC, Union Bank, Bank of India and State Bank of India along with many other banks recently increased the interest rates on fixed deposits (FD) for certain periods. If you also intend to get a bank FD, then before that you should also know about the Kisan Vikas Patra (KVP) scheme of the post office. You should decide where you should invest your money only after comparing FD and Kisan Vikas Patra.
Kisan Vikas Patra (KVP)
The interest on Kisan Vikas Patra is decided on a quarterly basis. Currently, the government is paying interest on it at the rate of 7.5 percent. The lock-in period of KVP is two years and six months. This means that you cannot withdraw money from this scheme before two and a half years under normal circumstances. Its maturity period is 10 years. There is no maximum investment limit in this, but you have to invest at least 1 thousand rupees. The person investing in Kisan Vikas Patra must be at least 18 years of age. Apart from single account, there is also a facility of joint account. Minors can also join the scheme, but their parents will have to look after it.
Also Read: FD Rate Hike: This bank increased FD rates, get up to 9.75 percent interest on deposited money
There is no tax exemption on Kisan Vikas Patra, because this scheme does not come under 80C. TDS is deducted by the government on income. In this, this certificate can be transferred from one person to another. It can also be transferred from one post office to another. The money invested in this scheme will double in 115 months i.e. 9 years and 7 months.
Bank FDs
The amount deposited in a bank FD earns interest at a fixed rate which is determined at the time of opening the account. FD holders can choose to receive interest earned monthly, quarterly, half-yearly or annually as per their choice. You can invest money in FDs for a period ranging from 7 days to ten years. As far as tax exemption is concerned, tax exemption is available on tax saving FDs of 5 years. Not on FDs of other tenures. Under Section 80C of the Income Tax Act, you can claim a deduction of Rs 1.5 lakh in the total taxable income on tax saver FDs.
Currently, Axis is giving 7.10% interest on FDs with a tenure of 2.5 years. The interest rate of State Bank of India is 7% per annum. If you open an FD account for 2.5 years in HDFC Bank, you will get 7% interest. Bank of India is giving 6.75% interest and Union Bank is giving 6.50% interest.
Where is the greater benefit?
If we look at the interest rate, the interest rate of Kisan Vikas Patra is higher than that of a bank FD of two and a half years duration. Investing in KVP will give you 7.5% interest, whereas currently no big bank is giving more than 7% interest on FD of two and a half years duration. As far as liquidity is concerned, bank FD is better in this case. In Kisan Vikas Patra, you cannot withdraw money before two and a half years except in some special circumstances. On the other hand, you can break the bank FD anytime. Yes, if you do this, you will get less interest and you may also have to pay a penalty.
