Day by day Bank FDs are losing their popularity due to their reduction of interest rates. A few years ago, fixed deposits were offering interest at the rate of 8 to 9%. But now, it's moving down drastically. As a result, investments under Post Office saving schemes are growing these days. National Saving Certificate (NSC) and Kisan Vikash Patra (KVP) are both Government-sponsored saving schemes that are still offering a good rate of return.
NSC is a tax-saving scheme, whereas KVP is known as a money-doubling scheme. There are some fundamental differences between NSC and KVP. Both have some advantages and disadvantages. In this article, I am going to discuss the National Saving Certificate and Kisan Vikash Patra. After reading this, you will have an idea of which option will be better for you.
NSC or the 'National Savings Certificate' is categorized under Post Office Savings Schemes. Like PPF (Public Provident Fund), NSC is a Government of India-sponsored saving bond and ideal for small to medium investments. The saving bond comes with 5-year of tenure with a fixed rate of interest. An individual can purchase NSCs from any post office. The minimum investment under NSC is rs. 1000 and there is no upper limit. The investment amount must be a multiple of 100. Earlier depositors were getting a physical bond certificate against the investment. Presently, post offices are providing a passbook for the same. The authority will print the NSC record in the passbook whenever you buy NSCs. One can have several NSCs but only one NSC is allowed to purchase in a single day.
Kishan Vikash Patra is a one-time investment scheme by the Government of India. Unlike NSC, it does not have a fixed tenure. The main highlight of KVP is doubling the investment. This small savings plan has become very popular for its attractive feature of doubling the amount of your investment after a pre-determined period of 124 months. The tenure of the Kishan Vikash Patra scheme is decided based on the interest rate and how long it will take to doubling the money. Such as, if you invest 10,000 with an interest rate of 6.9%, the tenure will be 124 months. On maturity, you will receive 20,000. As of Sept 2021, the rate of interest of KVP is 6.9% that compounds annually. Initially, the scheme was eligible only for farmers. However, later it opened for everyone.
When most of the savings scheme’s interests are falling down, NSC still giving better returns. The current interest rate (2021) is 6.8% and is compounded annually. Further, the ROI (Rate of interest) is fixed but the Govt has the authority to revise the rate every six months.
On the contrary, the KVP is also a savings certificate scheme. As of now the current rate of interest is 6.9% which is quite higher than NSC and compounded annually. It is a secure scheme sponsored by the Government of India. The ROI is revised periodically.
There are no such differences in investment limits either in NSC or KVP and do not have any upper limit of investment. Both schemes allow a minimum purchase of Rs. 1,000.
You can get a loan against both NSC and KVP certificates from most financial institutions. The rate of interest of loans can vary from bank to bank. You can get a loan from NSC or KVP in two ways - either in EMI mode or in an overdraft facility. The overdraft facility is nothing but an agreement between the bank and account holder, which allows the account holder to withdraw more funds than the bank balance.
The tenure of a Nation Saving Certificate (NSC) is five years. There is no fixed tenure set for the Kishan Vikash Patra (KVP). The maturity term of the Kishan Bikash Patra scheme is decided based on the interest rate and how long it will take to double the amount. KVP certificates after April 2021 are maturing in 118 months.
Investments upto 1.50 lakh in NSC qualify for a tax deduction under 80C up to 1.50 lakh in a financial year. Income from NSC interest is taxable and applicable according to the income tax slab.
On the other hand, KVP does not offer any tax benefits. Income from the interest is also taxable.
|Minimum investment||Rs 1000||Rs 1000|
|Maximum investment||No limit||No limit|
|Tenure||5 years||(Not Fixed) Presently 118 months|
|Lock-in period||5 years||2 years 6 months|
|Eligibility||Only for Indian residents||Only for Indian residents and trusts|
|Premature withdrawal||Not applicable||After 30 months can be available|
|Tax deductions||Applicable Under Section 80C.||Not applicable|
NSC and KVP are both popular savings schemes in India. You can invest in these instruments without fear of losing your capital. Both are very secure in terms of capital security. If you are a risk-averse investor, you can choose one of those. Still, if you are confused between NSC or KVP, I am going to explain specifically which option will be better for you.
If your intention is tax saving along with investment, you can go with NSC. Or, you can invest in KVP if you want a better return. One good thing about KVP is, in case if you need money, you can close it prematurely. On the contrary, you must retain your NSC for five years. In terms of capital security, both schemes are Gov. sponsored and adequately secured. National Saving Certificate guarantees you that your capital is only yours. No one has control over it or even a Court order. However, your money in KVP can be overtaken by a Court order.