Reasons not to buy Kisan Vikas Patra
Budget 2014 has re-introduced Kisan Vikas Patra Scheme (no, it was not only for Kisan, a normal Indian Resident who has attained the age of 18 could invest in Kisan Vikas Patra), which was discontinued in 2011. Earlier this scheme was big hit due to two reasons; first one being it used to double the invested money in 8 years 7 months and second being the assessee did not require to disclose the source of invested amount. Thus it used to bring the unaccounted money in the ambit of post office savings. But now the scenario has changed, the KYC norms have become stringent, Government might ask investor to provide details of PAN
If the features of the Kisan Vikas Patra remains same as it was before than it will not be wise to invest in it. Few reasons of why you should stay away from Kisan Vikas Patra:
1. No Tax Benefit u/s 80C
Unlike National Savings Certificate and Public Provident Fund, Kisan Vikas Patra was never a part of eligible tax saving instruments under section 80C. So there is no benefit of investing in Kisan Vikas Patra if you have other options open like NSC, PPF etc.
2. Interest is Taxable
Interest on Kisan Vikas Patra accrues every year but unlike interest from PPF which is tax-free, interest from Kisan Vikas Patra was taxable under the head “Income from Other Sources”.
3. No Online Facility
Kisan Vikas Patra used to come in a form of “Certificate” which could be bought from post office in cash, in denominations of Rs.100, Rs.500, Rs.1,000, Rs.5,000 and Rs.50,000. There was no online facility of investing money, you have to visit post office for investment as well as for redemption.
Bank FD is more liquid than Kisan Vikas Patra. Bank Fixed Deposits can be broken any time while lock-in-period of Kisan Vikas Patra was two and half year. So in case of financial crunch investor would be helpless in case of investment is made in Kisan Vikas Patra.
5. Interest rate is similar to bank fixed deposit
The rate of interest was 9% p.a. before it was phased out which is now bank offering on FD. So with the above four limitations, very little room left for investor to invest in Kisan Vikas Patra.
All the above limitations are penned down considering the features of Kisan Vikas Patra to remain same as it was before. If any change happens, for instance if the rate of interest is declared anything above 9% than this would be a go-for option for investor. But for now its a big no for buying Kisan Vikas Patra.