The BJP government has recently relaunched the famous Kisan Vikas Patra. Like before these can be purchased through post offices. The amount invested in these would earn an interest of 8.7% annually. Also right now there is no limit on the amount you can invest in these and these KVPs will be in physical form, which means they will be held as printed certificates and will not be in a demat format.
Here’s a quick check on the tax implication of investing in Kisan Vikas Patra –
- The amount invested in these is NOT eligible for Deduction under Section 80C.
- The interest accrued on KVPs shall be fully taxable; this interest income shall form part of your Income from Other Sources. The lock in period is of 30 months, the interest pertaining to each financial year shall be calculated and included in Income from Other Sources. Therefore this income will also be taxed at the same rate as the rest of your Gross Income is taxed at. This means, if you are in the 20% tax bracket, you will have to pay 20% tax on your interest income from KVPs.
Hope this will help you take a wise decision if you plan to invest!