Kisan Vikas Patra Vs Public Provident Fund(PPF) which is better?


The different government schemes of investment have gained immense popularity among the public in India as they assure the best investment rates and are highly affordable and accessible to all. The different kinds of state-owned small savings investment vehicles also enable the investors for some attractive tax benefits. In terms of assuring the highest returns, the two most popular savings schemes available with the post offices are Public Provident Fund (PPF) and Kisan Vikas Patra (KVP). Hereunder we compare between these two investment vehicles to understand them better.

KVP (Kisan Vikas Patra)

While choosing to invest in KVP, individuals can earn up to 7.6% interest on their invested amount. Similar to what is done in PPF account, the interests are compounded annually. The start the investment, you need to invest a minimum of Rs 1000. There is no maximum limit for your investment. The investment amount will double in 112 months. KVP certificates can be purchased from any post office. Nomination facility is available. Certificate is transferable between post offices and between persons. From the date of issue, you can get back the money on your certificate after two and half years if there is a need for you.

PPF (Public Provident Fund Account)

This scheme gives 8% interest rate over the invested amount. The interest is compounded annually int his case. It is possible to invest as low as Rs. 500 and up to a maximum limit of Rs. 1.5 lakhs per year. You can also choose to make the deposit in lump sum or in installments. You need to open this account with Rs 100 and have a minimum deposit of Rs 500 in it to be able to operate it. The maturity period is 15 years but it can also be extended to five more years eventually. You cannot close the account before 15 years. Starting from the 7th financial year of opening the account, you can start withdrawing cash if you want. From the 3rd year, loan facility is also available.

Points of comparison between KVP and PPF

Interest rate

The rate of interest from 1st July 2019 on KVP is 7.6%. This is considerably lesser than what you get on PPF. Also the other benefits that you have in PPF are not available in Kisan Vikas patra.

Deduction under Section 80C

Under Section 80C, investments made in PPF can enable you for a deduction of Rs. 1,50,000 in a financial year. However, investments in KVP are not eligible for tax deductions.

Tax on the interest earned

As it is considered under the accounting category ‘income from other sources’, the amount you earn as interest on the deposits in KVP is taxable, while it is not taxable in case of PPF.

Lock in period

The lock in period is quite high in case of KVP as against the kind of flexibility you enjoy with a PPF scheme. Even in case of PPF, experts advise that you can think of investing to an upper limit of Rs. 1,50,000 per annum and then choose other kinds of investment options in order to maximize your tax savings.
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