NSC Vs KVP: Deciding the Optimal Saving Scheme

The Government of India has set up many saving schemes to encourage citizens to invest their money. If you are looking for secure investments with good returns, schemes like the National Savings Certificates (NSC) and the Kisan Vikas Patra (KVP) are perfect for you.

NSC is a fixed-income investment scheme set up by the government for low- and middle-income earners to invest their savings. It also allows individuals to save on taxes.

KVP is another government scheme to encourage people to save for the long term. KVP was initially established for farmers. But now that the scheme is open to every resident Indian, deciding which investment scheme to go for can be a tussle. But we have you covered. 

This blog post will talk about the differences between the two schemes. We also explore NSC and KVP interest rates and other features. Besides, we will also do a side-by-side NSC vs KVP comparison so you can make the right investment decision.

Overview of National Savings Certificates

Any Indian citizen can apply for National Savings Certificates at the post offices, regardless of age. However, it is a savings scheme only for individuals. Trusts, non-resident Indians, companies and Hindu Undivided families (HUF) cannot apply.

Features of the National Savings Certificates 

Let’s have a look at some important features of NSCs:

#1. The NSC maturity period is 5 years. 

#2. You can invest only Rs. 100. There is no maximum limit.

#3. The interest rate is fixed and revised quarterly by the government. Currently, the NSC interest rate in 2023 is around 7.7%.

#4. Only investments of up to Rs. 1.5 Lakhs are eligible for a tax deduction under section 80C of the Income Tax Act.

#5. You can use NSC as collateral for a loan. However, the postmaster must authorize the certificate transfer to the financial institution.

#6. You can transfer your NSC from one post office to another. You can also transfer your NSC to another person.

#7. The investor can add nominees (including minors) to the scheme. In case the investor passes away during the tenure, the nominee inherits the scheme’s certificates.

#8. The NSCs are easily accessible and can be opened at any authorized post office upon submission of the necessary documents.

#9. The certificate can be withdrawn prematurely only upon a court order or the holder’s passing. 

Overview of Kisan Vikas Patra

KVP is a savings scheme started by the Indian government in 1988 to encourage long-term savings among citizens. It was initially established for farmers, hence the name. But it is now available to all citizens. You can register for KVP at any post office and some selected financial institutions. 

There are three types of KVP certificates.

#1. Single holder certificate: This is issued to an adult. You can also request this type of certificate on behalf of a minor.

#2. Joint A type certificate: This certificate is issued to two adults jointly. On maturity, the payout is issued to both holders. For transfer, nomination or cancellation, both holders' signatures are needed. 

#3. Joint B certificate type: This certificate is also issued to two adults. However, on maturity, the payout is payable to either the holder or the survivor.

Features of the Kisan Vikas Patra

#1. The KVP maturity period is 118 months, which equals 9 years and 10 months.

#2. The minimum amount to start KVP is Rs. 1000. There is no maximum limit. 

#3. KVP currently earns an interest rate of around 7.5%.

#4. KVP can be used as collateral when applying for a loan in financial institutions.

#5. You can withdraw from this scheme after two and a half years.

#6. There is no Demat form available for KVP; it comes in physical form. 

#7. There is no tax benefit under the KVP scheme, and the interest earned is taxable. However, upon the completion of the tenure, TDS (tax deducted at source) is not deducted from the final amount. 

NSC Vs KVP: a detailed comparison

Here are the differences between NSC and KVP

NSC Vs KVP: Which Should You Pick?

That was our round-up of NSC vs KVP comparison. Both these schemes are some of the safest investments available to Indian citizens that also offer guaranteed returns.

So, between the two schemes, NSC vs KVP, which one should you invest in? Carefully weigh your financial needs and wants before making a decision.

Ideally, NSC is best if you want to earn higher returns. At the same time, you can enjoy tax deduction benefits to maximize your earnings. It is also an ideal choice if you practice long-term savings, especially when you have a big financial goal to accomplish in the future.

KVP, on the other hand, is best if you want a slightly lower lock-in period in case an urgent financial need arises. It is also suitable for trusts that are looking to invest their funds, as NSCs are only for individuals.